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Barrington Encouraged By Pandora's Cross-Platform Music Approach

Pandora Media Inc P reported its 2Q16 revenues marginally short and EPS slightly ahead of expectations. Barrington’s James C. Goss reiterated an Outperform rating on the company, with a price target of $16. The analyst commented that the company’s’ cross-platform music approach had added a new dimension.

Pandora Media reported its quarterly revenue at $343.0 million, missing the guidance and the Barrington estimate of $351.6 million. The core radio business recorded revenue of $320.3 million, short of the estimate of $328.6 million.

Non-GAAP EPS came in at $(0.12), better than the consensus expectation of $(0.16). Management noted that the revenue shortfall in the core radio business was on account of weak national ad spending, which is expected to have rebounded towards the end of the quarter.

Planned Product Expansions

With the Ticketfly acquisition, Pandora is able to connect music listeners to live events. The company expects this to significantly boost revenues, analyst James Goss mentioned. He added, “Launch of an on-demand service is planned for later this year but agreements with major labels have not yet been finalized.”

Improved IP development for song selection, lowering skips, increasing engagement, reduced royalty costs and lowering churn resulted in an increase in listening hours in 2Q. “Other developments to change listening behaviors have included a larger variety of content including podcasts, which has tended to have different usage characteristics versus traditional music listening,” the analyst wrote.

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DateFirmActionFromTo
Jul 2016Pacific CrestDowngradesSector WeightUnderweight
Jul 2016Piper JaffrayUpgradesNeutralOverweight
Jun 2016Morgan StanleyUpgradesEqualweightOverweight

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