FBR Capital Downgrades Pandora (P) to Market Perform on Ad Shortfall and Higher Costs
Find out which companies are about to raise their dividend well before the news hits the Street with StreetInsider.com's Dividend Insider Elite. Sign-up for a FREE trial here.
FBR Capital downgraded Pandora (NYSE: P) from Outperform to Market Perform with a price target of $12.00 amid the troubling combination of ad slowdown and guidance for higher spending.
Analyst Barton Crockett commented, "Ad growth was the main problem in 3Q16, slowing to 7% on only a 2% rise in RPM, versus 23% and 15% ad growth in 1Q16 and 2Q16, respectively, and our anticipation for 13% growth in 3Q16. This drove a $15 million shortfall in ad revenues and $10 million in EBITDA versus our estimates. Pandora blamed shortfalls in entertainment, telecom, and digital national advertising that emerged in 2Q16 and are seen persisting into 4Q16. Our talks at the reception following the report suggested pressure from Facebook and Snapchat, and suboptimal execution of upfront national ad sales and local ad sales force hiring."
He added, "We had thought that the guide for $120 million of spending for the on-demand launch in 2016 captured the opex impact. But Pandora said there is an additional $24 million per quarter of spending starting mainly in 4Q16. This appears to be tied in part to the cost of administering complicated licensing contracts with labels. We had already captured the additional $22 million per quarter in costs from the higher licensing fees for the direct deals with labels."
Shares of Pandora closed at $12.18 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Facebook (FB) Q4 Estimates, PT Raised At Jefferies
- Starbucks Coffee (SBUX): Some Risk To Earnings - Buckingham Research
- Procter & Gamble (PG) PT Raised to $96 at UBS Following 2Q Report
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Downgrades
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!