Ahead of Pandora Premium Launch, MKM Analyst Lowers PTBy Carrie Williams
Not everything was music to ears for Internet radio provider Pandora Media Inc. (NYSE: P) lately, the stock, which was already down by 11.5% in October, took yet another pounding when its share prices fell from $12.18 to $10.43 during November. This further 15% drop was prompted by the company’s disappointing Q3 results, wherein Pandora had reported both earnings as well as revenue miss.
In a report released today, analyst Rob Sanderson from MKM Partners reiterated a Hold rating on Pandora Media and lowered the price target from $13 to $12. The new PT is a 10% upside from the current price of $10.90.
Pandora had been recently bombarded with negative drivers like losses in current user base, stiff competition from Apple, Spotify, Amazon, and Google, as well as ill-timed strategic errors made by the company. The below par Q3 results, with EPS of -$0.07 (vs. -$0.06) and revenue of $351.9 million (vs. street estimates of $366.3 million) also caused a further decline in Pandora’s share prices.
The firm revamped their model, saying;
“We are lowering our Q4 estimates for revenue growth and EBITDA after another disappointing quarter. We cut our forecast for revenue growth by 700bps to $368mn (9% y/y), and cut our 2017 revenue growth estimate to 13%. Our new non-GAAP EPS estimate for Q4 has been lowered by $0.24 to a ($0.23).”
However, the company is planning to restore investor confidence by announcing some new strategies. Pandora has already declared the launch of its on-demand service, Pandora Premium, scheduled to be introduced at an event in NYC on December 6.
Sanderson believes that Pandora has a strong data position to deliver personalized music service as long as there is adequate differentiation, but remained firmly on the sidelines for now, as he considers this as an increasingly crowded space. Sanderson expects Premium to add 2.4 million subscribers at $10 per month during first two years, while the revamped Plus is expected to bring in another 900k each year. Sanderson also forecasts continued decline in ad-supported listeners, with a meaningful increase in RPM, and the possibility of an M&A chatter in near future.
Pandora Media currently has an analyst consensus rating of a Moderate Buy with a $14.67 average price target, according to TipRanks.com. This PT is an upside of 34.34% from the current levels.