Mizuho Affirms Pandora (P) at 'Neutral'; Label Deals are Positive, But Key Player Still Missing
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Mizuho affirms Pandora Media (NYSE: P) with a Neutral rating and $11 price target after the company announced the signing of direct licensing agreements for recorded music with Merlin Network, Sony Music and Universal Music Group, along with The Orchard and over 30 other independent labels and distributors.
Analyst Neil Doshi commented today:
We are pleased to see that Pandora has signed two of the three biggest labels; Sony and Universal (27% and 23% share, respectively). Furthermore, this gives us confidence that P will be able to launch its On-Demand product in the U.S. before year end.
However, Warner Music and a launch date for the on-demand products were not announced. Warner has ~15% market share, and includes artists such as Coldplay, David Guetta, Charlie XCX, Prince, Madonna, Whiz Khalifa, Jason Derulo, and others. We believe that Pandora is in active negotiations with Warner and can launch without it, but getting Warner is key to offering the same catalogue as its competitors.
In our opinion, Pandora's multi-tier pricing strategy should accelerate subscriber growth. While the company was sparse with details on what the price points and additional features/functionality of the on-demand products would look like, press outlets have reported that the Pandora One product will be revamped and will allow users to save songs, repeat songs, and create extended playlists. Given Pandora's extensive data on each user's listening preferences, the $10/mo plan will likely be more personalized than existing services offered by Google, Apple and Spotify.
Doshi noted that the firm's price target and rating are under review for Pandora.
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