DJ Pandora: A Few Reasons to Sing -- Barrons.com
Nov 16, 2017 11:28:00 (ET)
By Emily Bary
It's been a rough year for Pandora investors, but one analyst sees better days ahead.
BMO Capital Markets analyst Daniel Salmon upgraded Pandora shares to Outperform on Thursday, writing that while Pandora "may lack near-term catalysts," some big picture trends and changes to its business model "are being underappreciated."
The stock is up 3.1% in Thursday trading, though it's still down some 60% so far this year.
Salmon sees room for Pandora to capitalize on marketers' renewed interest in audio ads. "Admittedly, the broader enthusiasm we have heard largely centers on the growth of voice-enabled connected devices," he writes. "But we believe Pandora can be a relative beneficiary as advertiser and agency attention to audio ads increases" and as the company improves its targeting technology.
Pandora is also expanding further into forms of non-music content, like podcasts. Salmon thinks Pandora will still primarily be for listening to music but notes that non-music content tends to be more favorable than recorded songs from a profitability standpoint.
Investors haven't been quite sure what to make of Pandora's late-to-the-game on-demand streaming service, and some were predicting that the company's new management would de-emphasize this area of the business. But Salmon points out that while that service, Pandora Premium, is up against strong competition from Spotify and Apple Music, it's performing better than expected and putting the company on a steadier revenue trajectory.
Salmon's price target of $7 is 38% above current levels, though his "strong bull" case of $12 factors in the possibility of SiriusXM acquiring the company for $12/share. Sirius and Pandora were reportedly in talks about an acquisition earlier this year, but Sirius ended up only making a strategic investment in Pandora.
(END) Dow Jones Newswires
November 16, 2017 11:28 ET (16:28 GMT)
