Seeking Alpha

Spotify reportedly preps for IPO; sell-side defends Pandora

  • Bloomberg reports Spotify is working with Goldman to obtain a credit facility, a move that could pave the way for the music streaming service to go public.
  • The news service observes Facebook, Twitter, and Zynga all took out credit facilities before they went public, and that banks "often pitch loans to early-stage technology companies with an eye toward an underwriting role on an IPO down the road."
  • The report comes as Spotify announces it's acquiring The Echo Nest, developer of a music intelligence platform that delivers personalized song/artist recommendations and audience analytics. Spotify says it will use The Echo Nest to "drive music discovery" for its users, and help brands/partners develop better music experiences.
  • Meanwhile, Cowen and Wells Fargo are defending Pandora (P -5.8%) following the release of its Feb. audience metrics, even as both firms admit the numbers fell short of their estimates.
  • Cowen thinks Pandora's decision to stop releasing monthly metrics is due to the launch of a local audience measurement service in partnership with private Triton Digital. It also considers a selloff unsurprising in light of Pandora's recent gains.
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Comments (26)
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    How is sell off unsurprising if Cowen has a price target of 41$? I am guessing they never intended for the stock to get to their price target.

     

    Wells has a PT of 37$ so stock is beyond their valuation, so I am weary how they can defend bad fundamentals.

     

    Yes nothing to worry about but unless you have a ridiculous price target that values the company beyond perfection, stagnant growth is not something to brush off especially when Pandora makes absolutely no profits.

     

    Only reason Pandora no longer will show monthly metrics is because they know their growth has plateaued as point out by CEO in their 10K and will be in decline very soon. Blackberry did the same thing, once their subs started to decline, they no showed their sub numbers.

     

    With rising competition and Apple shutting out Pandora from their ecosystem, these concerns shouldn't be taken lightly.

     

    After 15 years in the market, I know one thing for certain. Analysts despise to admit being wrong, they will will push their reckless convictions until stock collapse and spin off an excuse to back up their downgrades.

     

    Spotify acquisition of Echo Nest will put them in direct competition against Pandora. Spotify now has best of both worlds, curation and ondemand music service with a much larger library and world exposure than Pandora lacks. On top of it, Apple seems to be supporting Spotify while shutting out Pandora in Carplay and Apple TV.
    6 Mar 2014, 02:25 PM Reply Like
  • dgulick
    , contributor
    Comments (2003) | Send Message
     
    <<stagnant growth>>
    Not really:
    P users up +2.6% m/m
    ave hrs/listener/day +3.1% m/m
    share of US radio now at 8.91%, up from 8.57% last month, +34 basis pts

     

    This during the month of the Beats Music launch (with huge spend on Superbowl and Olympics commercials).
    6 Mar 2014, 03:38 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    That is stagnant growth, don't think Pandora quadrupled in market cap to have lower single digit growth.
    6 Mar 2014, 04:15 PM Reply Like
  • dgulick
    , contributor
    Comments (2003) | Send Message
     
    Stagnant? Those were m/m numbers! The surprise for me was the +34 basis pt jump is US radio share, that's huge! Annualized that would be +60% y/y! (though I don't recommend extrapolating). But I have updated my model and expect them to pass 10% of US radio listening by fall.
    6 Mar 2014, 04:52 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    Just like your model was suppose to show increased total listening hours and active listeners from Dec? You and analyst can come up all kinds of models but the fact is CEO is worried and so should you.

     

    They added monthly metrics no too long ago and now they removing as soon as they see that the numbers going to backfire, now hiding behind Triton generalized numbers.
    6 Mar 2014, 05:32 PM Reply Like
  • dgulick
    , contributor
    Comments (2003) | Send Message
     
    <<Just like your model was suppose to show increased total listening hours and active listeners from Dec? >>

     

    Yeah, I never said that. Maybe you were thinking about my call on Nov and Dec back when iTunes Radio was "going to catch Pandora in a month" (didn't happen, lol):
    http://seekingalpha.co...

     

    They aren't removing metrics because they are going to "backfire", they now have an MRC approved model, they don't need them. And they are still going to report them, just quarterly instead of monthly.
    6 Mar 2014, 06:00 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    Yeah yeah keep telling yourself that.
    6 Mar 2014, 10:55 PM Reply Like
  • JeffreyLangBoyd
    , contributor
    Comments (663) | Send Message
     
    Hope Spotify allows subscribers to participate in the IPO.
    6 Mar 2014, 02:28 PM Reply Like
  • LARadio guy
    , contributor
    Comments (70) | Send Message
     
    <"With rising competition and Apple shutting out Pandora from their ecosystem, these concerns shouldn't be taken lightly."> Competition may be rising, but they are in for a rude awakening. I think Spotify and Pandora will be the only two relevant players at the end of the day. First of all, P is way ahead of all of the "competition".. by a significant margin. Pandora is the most downloaded music app, with half of all smartphone owners having downloaded it... whereas only 9% of smartphone users have downloaded Spotify. that's a lot of catching up to do.

     

    o Pandora: 50%
    o iHeart Radio: 16%
    o Spotify: 9%

     

    Secondly, Apple is only shutting out P from CarPlay... not their entire "Ecosystem". and, it will be to their detriment... because even MacWorld says iTunes Radio is lackluster at best, and CarPlay is all about pushing iTunes Radio so they can sell ads and make more revenue (like their buddy's at P are doing right now)

     

    http://bit.ly/1ouKvJY
    6 Mar 2014, 02:42 PM Reply Like
  • Jack Banser
    , contributor
    Comments (501) | Send Message
     
    itunes radio is awesome. It's on every iPhone. I use spotify on my computer and itunes radio if im going to listen to music on my phone-which is what I use as an ipod- I deleted Pandora off my phone probably about a year ago because in my opinion spotify is better all around...
    6 Mar 2014, 05:01 PM Reply Like
  • LARadio guy
    , contributor
    Comments (70) | Send Message
     
    I am sure we have all heard that "opinions are like belly-buttons, everybody has one." it's a free country, but your opinion regarding "which is better" or that you deleted the app is pointless... look at the numbers, far more people use (hence like) P vs. Spotify. not everyone wants to spend hours cultivating playlists. P is much more user friendly for non-music nerds... although i like and listen to both (again, useless opinion and has nothing to do with facts or numbers)
    6 Mar 2014, 05:07 PM Reply Like
  • trollipop
    , contributor
    Comments (47) | Send Message
     
    P will bounce back, it always does. Just look at the YTD chart.
    6 Mar 2014, 05:52 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    You should also look at market indexes, see the similarity? If this was a bear market Pandora would have been a 5$ stock. This garbage will go back to 8$ once market corrects.

     

    high institutional ownership is a double edged sword, they manipulate with low volume but once they need to get out, its a long squeeze.
    6 Mar 2014, 05:59 PM Reply Like
  • LARadio guy
    , contributor
    Comments (70) | Send Message
     
    you heard it here... $8 says @manicdvin. Do you care to give us a prediction date if you are so confident?
    6 Mar 2014, 07:10 PM Reply Like
  • dgulick
    , contributor
    Comments (2003) | Send Message
     
    I guess his $7 by Dec 2013 is out, lol.
    6 Mar 2014, 07:18 PM Reply Like
  • Hellz
    , contributor
    Comments (173) | Send Message
     
    Bounce back? Look at the friggin graph, it has become hyperbolic the last 2 years. Get the _bleep_ out
    7 Mar 2014, 01:27 AM Reply Like
  • Breezy Breeze
    , contributor
    Comments (43) | Send Message
     
    Pandora has more downloads because for the most part its a free music app where spotify isn't. A Spotify IPO would be a great investment.
    6 Mar 2014, 08:54 PM Reply Like
  • dajhilton
    , contributor
    Comments (205) | Send Message
     
    More 'downloads'? Really? I didn't think Pandora was in the business of selling downloads.
    7 Mar 2014, 12:14 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (627) | Send Message
     
    Pandora survived iTunes Radio. Then it survived Beats launch. Now it has to survive Spotify IPO - Spotify will get a huge free publicity boost in the U.S. from it. Then it will have to survive YouTube music service. After that it will need to survive Amazon's service.

     

    This is all nice, and I am sure that a year from now Pandora will still be around, but I believe that "Look, I survived!" is not a good enough reason to own a company that projects losses in its 9th year in business and trades at a stratospheric valuation.
    6 Mar 2014, 10:37 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    Not to mention, it seems it is Goldman (who was not part of Pandora offering) who might do IPO so that means all those analysts who are all rosy on Pandora thinking spotify management would make a deal with them instead are now out of luck.
    7 Mar 2014, 07:41 AM Reply Like
  • dgulick
    , contributor
    Comments (2003) | Send Message
     
    <<survived>>
    P did more than just "survive" iTunes Radio, the launch caused a small one month drop in listeners (but not in *listening*, so the users they lost were low engagement users of P) and then P was back to growth, despite many predictions to the contraire, and a Rdio free trial, Spotify free mobile radio launch, Beats launch. They will do more than merely "survive" Spotify's IPO, Youtube and Amazon as well.
    7 Mar 2014, 10:48 AM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    I thought none of those radio services you listed were competitors.

     

    You are worse than John Kerry in your flip flops.
    7 Mar 2014, 12:03 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    Samsung just launched its own FREE RADIO MUSIC service on Android WITH NO ADS.

     

    http://bit.ly/1kCR1kq

     

    http://bit.ly/1kCRzXx

     

    The bad news keeps on coming!
    7 Mar 2014, 01:33 PM Reply Like
  • soycapital
    , contributor
    Comments (74) | Send Message
     
    I started off with Pandora but as soon as I found out about Spotify I quit Pandora. If you are an investor in P I'd take a look for myself.
    6 Mar 2014, 11:00 PM Reply Like
  • dajhilton
    , contributor
    Comments (205) | Send Message
     
    I don't see that it's an either/or, as P and Spotify aren't competing in the same market. Pandora is a webcaster (with all the programming limitations that go with that) and it has no significant competitors in the market for providing webcast music. Spotify on the other hand is an inter-active music streaming service. A 'smart' service versus a traditional 'dumb' one. It provides services that Pandora is prohibited by law from providing. Spotify has and will have many competitors, but interactive delivery of recorded music -- e.g., just ask Siri for Sinatra whenever you want to hear Frank -- is bound to be a far more lucrative market in the long run than offering pre-programmed streamed music. So your confidence in either service should depend on your believe in what type of music services listeners want, and will pay for (or listen to ads during). It won't depend on comparing growth factors and other metrics of Pandora versus Spotify/iTunes/Amazon.
    7 Mar 2014, 12:21 PM Reply Like
  • manicdvln
    , contributor
    Comments (1453) | Send Message
     
    Ridiculous notion because Beats and Spotify offer curated music as well. Pandora also has to compete against Songza which creates playlists on mood and Milk music offers its curated service with no ads and with exclusive content, both free services.
    7 Mar 2014, 01:46 PM Reply Like
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