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Pandora: Bracing For Spotify

Mar. 04, 2018 1:20 PM ETPandora Media (P)AAPL, SPOT86 Comments
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B&B Market


  • Pandora Premium has finally launched on desktop.
  • Restructuring will lower costs and help boost thin margins.
  • A Spotify listing will finally allow for a comparable company to value with Pandora.

Spotify (SPOT) is gearing to go public this year, most likely in the first quarter of 2018. This is one of, if not the, biggest competitor for Pandora (NYSE:P) and a public filing will provide greater insight for investors. P seems to be in the midst of a very exciting time with the launch of 'Pandora Premium' on desktop, a revenue beat in Q4 and gearing its focus towards voice-assistants and smart speakers. The Spotify filing will finally be the last piece of the puzzle needed for full analysis on Pandora.

Going Public

Spotify's filing is not a conventional IPO, instead they are going to go the route of a so-called direct listing. While this is not a new process, this is the first time a company the size of Spotify is using this method. Being the most comparable to Pandora (P), a public listing of Spotify is going to finally allow a direct comparison of valuations for the two companies. There is sure to be a lot of excitement on its first trading day but lets look at how Pandora is bracing for this transition.

On Feb. 28, Spotify filed to go public for up to $1 billion. The company will go public on the NYSE and trade under the ticker "SPOT". The valuation of Spotify is far beneath latest estimates upwards of $16 billion. However, on private markets, shares have traded between $90 - $123 giving a valuation of ~$23 billion. As of close on Feb. 28, Pandora was valued at a little over $1 billion ($1.1 bil). This would imply that Spotify is worth 23x what Pandora is worth, which seems a little exaggerated.

Profits (or lack of)

Spotify is recognized as the largest music streaming service on the market. The service had 159 million MAUs (up 29% YoY) and 71

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B&B Market is a young investor who is passionate about Chinese stocks and the companies behind them. Although I am early on in my professional career, I am not new to the markets.  I have put in enough years to have quite a few trading regrets.  These regrets are what led me to love the Chinese economy.  I aim to learn more and more everyday as I write, and am looking for conversations with other investors.  Coverage consists of stocks that have been determined as undervalued, hot-topics, or upcoming IPOs.  I write as a form of due diligence, meaning that this is a part of my research process.  As a result, I have a personal incentive for well-researched coverage.For more in-depth coverage, including valuations with buy/sell targets, newsletters, and more, check out my Marketplace Service "Corporate China".Feel free to message/comment any companies you would like to see covered, or improvements you would like to see.  Thanks for reading!

Analyst’s Disclosure: I am/we are long P. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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