Pandora rallies on bullish Canaccord, MKM notes


A talk with Pandora's (P +3.4%) IR team has given Canaccord's Michael Graham (Buy, $43 PT) "renewed confidence in Pandora’s ability to exceed [Canaccord's] revenue targets over time, especially when viewed through the lens of future local sales capacity."

Pandora has been spending heavily to grow its local ad salesforce: Sales/marketing spend rose 63% Y/Y in Q1 to $61.8M.

Meanwhile, MKM's Rob Sanderson (Buy) believes Pandora could see $5.60/year in EPS one day with the help of rising ad load. He observes that while Pandora has a 9% share of ad-supported radio listening, its audio ad sales "represented less than 2% share of the spending pie last year."

Pandora's 2014 and 2015 EPS consensus estimates are only at $0.17 and $0.48, respectively. Though its ad load has been rising, the company has been taking a measured approach in order not to alienate users who have plenty of alternatives.

Shares have topped $29 for the first time since April.

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Comments (14)
  • manicdvln
    , contributor
    Comments (1545) | Send Message
     
    These are the same guys who had sell PT 10$ a few months ago now saying stock can go 115$ in 5 years and in between no change in fundamentals while growth slows. If you read ANALysts notes, lots of IFs, Coulds and buts which are words anyone would want to read!

     

    Analysts change their positions as much as the wind. Nothing but sheep huddling together on a bubble stock.

     

    Stock is back at 6 billion market cap with no profits to show for it, surely someone would buy this cheap undervalued company lol.

     

    Maybe Amazon should buy Pandora, Yelp and Zillow and rename it as Bubble Fund Holding company. Surely advertising your stock is better than advertising for the company.

     

    Bubble in the air....
    24 Jun 2014, 01:01 PM Reply Like
  • Chris Lau
    , contributor
    Comments (4156) | Send Message
     
    Actually, his track record is pretty good, according to TR: http://bit.ly/VhBqwL
    24 Jun 2014, 01:29 PM Reply Like
  • blake303
    , contributor
    Comments (194) | Send Message
     
    "Pandora rallies on bullish Canaccord, MKM notes"

     

    You misspelled "bullsh!t".

     

    http://bit.ly/1je8bQw
    http://bloom.bg/1jeaao5-rf4iB4x3TU~ZBQ1F8V2RZ...
    24 Jun 2014, 01:18 PM Reply Like
  • Christopher Speetzen
    , contributor
    Comments (596) | Send Message
     
    Great link! LOL
    24 Jun 2014, 01:27 PM Reply Like
  • dgulick
    , contributor
    Comments (2321) | Send Message
     
    @blake303,

     

    MKM's Rob Sanderson has certainly done a 180, but his turnaround is due to new information that has alleviated his concerns:
    1. overestimating the impact from competition (underestimating P's "stickiness")
    2. undue concern on royalties (ASCAP trial and Apple as "willing buyer")
    3. mobile advertising (recent quarter saw mobile RPMs +67% YoY)

     

    http://on.barrons.com/...

     

    "Apple has failed to compete effectively with its own “iTunes Radio” service."

     

    "More important, as device connectivity becomes more ubiquitous (especially in autos), the Internet will become the primary delivery mechanism for music services displacing FM- radio...and there is a very long way to go."

     

    http://bit.ly/1jeV5CE

     

    "P’s prime competitor is clearly FM-radio, not Apple, Spotify, Google or any other Internet service"
    24 Jun 2014, 03:45 PM Reply Like
  • blake303
    , contributor
    Comments (194) | Send Message
     
    @dgulick

     

    So you trust Sanderson's instincts now that they support your long thesis? He is clueless. Frankly, $10 is a more reasonable valuation than his current $35 target. Anyone that can be convinced that Spotify is not P's prime competitor is not worth listening to.
    24 Jun 2014, 05:20 PM Reply Like
  • dgulick
    , contributor
    Comments (2321) | Send Message
     
    I don't typically trust any analyst, relying on my own due diligence, but his turnaround is rather interesting and is the result of rethinking his valuation after his concerns of only a year ago have not occurred (I still remember all of the "at this rate iTunes Radio will overtake P in a month" articles).

     

    And Spotify is an entirely different service (on-demand/lean forward listening, i.e., an evolution of CD and digital sales) relative to Pandora (which is lean-back, i.e., the evolution of radio). Even their revenue split is evidence: Spotify is 80% subscriber revenues to 20% ad, P is the opposite: 80% ad revenue to 20% subscriber). You may think they are the same but you are wrong, despite iPod/iTunes, 80% of music listening is still "lean back" / radio which Pandora is currently disrupting.

     

    But both will be hugely successful as physical / digital sales and AM/FM radio will continue their declines.
    24 Jun 2014, 06:42 PM Reply Like
  • blake303
    , contributor
    Comments (194) | Send Message
     
    I don't think Spotify and Pandora are the same, I think they compete far more than Pandora longs are willing to admit. I'm also not anti-Pandora or believe that any current service is a "Pandora killer" in the near term. I just find the current valuation absurd based on P's slowing growth and lack of a moat. And don't bother telling me that the Music Genome Project is a moat.
    24 Jun 2014, 07:15 PM Reply Like
  • manicdvln
    , contributor
    Comments (1545) | Send Message
     
    Don't feed the troll blake. Dgluick permabull cheerleader. Any app on your phone is competition. It's about time and ads. Less time you spend with one app, less chance you will see or click an ad.

     

    And WSJ today wrote in interesting article and statistics.

     

    The sum of it "Companies have invested money into social media sites, but brands are learning that racking up fans and "likes" is not the same as minting sales". A Gallup poll shows a whopping 62% of media ads have no influence on purchases and in the case of Pandora which majority of its listeners are freeloader kids with no income, the matter is much much worse.

     

    http://bit.ly/1q6y10y

     

    Hence what I have been saying all along and redflags between Google/FB/P CC all indicating lower ad prices and less clicks on mobile ads vs desktop. Tech doom is near.
    24 Jun 2014, 08:20 PM Reply Like
  • dgulick
    , contributor
    Comments (2321) | Send Message
     
    @blake303,

     

    "Slowing growth"

     

    This gets bantered about quite a bit in the press and is largely to blame for the share slide, but is an oversimplification of the situation. "Slowing growth" is only seen in the "active users" metric and certainly indicates that monthly churn is up. But from the more important metric: usage (up +28% yoy), you can infer that the users that are jumping to competitors were not very engaged. Whereas every other metric one can consider (revenue, car activations, monthly usage) growth is fine.

     

    "And don't bother telling me that the Music Genome Project is a moat."

     

    OK, I won't. But do you have an explanation for P's usage up +28% YoY, despite all of the marauders at the gate (Apple, Google, Beats, Spotify, iHeartRadio)?

     

    Spotify and Pandora do compete, but the pie is growing so fast that their share of it is less of a concern.

     

    @manicdvln,

     

    Interesting article that I interpreted as good for Pandora, it is saying that advertising on social media (FB, TWTR, etc) is less effective than radio (P).
    25 Jun 2014, 10:13 AM Reply Like
  • tigerjohnni
    , contributor
    Comments (1551) | Send Message
     
    This is the kind of stuff we have to now tolerate with the legalization of marijuna!
    24 Jun 2014, 03:07 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (174) | Send Message
     
    When is the next event that will measure the health of this stock? Now that they've stopped reporting monthly metrics, is it the quarterly earnings report? Will 3rd parties report metrics on a monthly basis?
    26 Jun 2014, 08:42 AM Reply Like
  • dgulick
    , contributor
    Comments (2321) | Send Message
     
    Quarterly, and it will include the only look at listener metrics along w financials. NFLX did something similar when they stopped reporting churn (and shorts jumped all over it), but once it gets digested it didn't hurt them much! (didn't hurt NFLX I mean, hurt the shorts plenty!)

     

    "Will 3rd parties report metrics on a monthly basis?"

     

    Like Triton? No, that is internal for P and for their ad pricing/selling platforms, you could find an ad buyer and see P's local market share that way I suppose... Let me know if you find someone to do this for you!
    26 Jun 2014, 08:05 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (174) | Send Message
     
    Thx...that's what I was afraid of. We're back to flying blind for 3 month stretches. Probably in a period of trading based on tech momentum for three months at a time, then a big correction when investors actually get a peek at what's happening.

     

    Instead of giving investors fewer metrics, they should've given more. Include information about ads served with the listner counts and hours to put things in better context.
    27 Jun 2014, 07:52 AM Reply Like
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