Oppenheimer Remains Sidelined as Pandora (P) Announces Licensing Deals
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Oppenheimer reiterated a Perform rating on Pandora (NYSE: P) following the company's announced licensing deals with Sony Music, Universal Music, Merlin, and 40+ independent record labels. The new (on-demand) service is expected to launch domestically in 4Q:16, and will pay 65%-70% of its potential revenue to record labels.
Analyst Jason Helfstein commented, "We are now estimating intrinsic value of $16-$24 after Pandora announced licensing deals with two of the major record labels. Early Tuesday, P announced agreements with Sony Music, Universal Music, Merlin, and other independent labels, to provide a new $9.99 monthly subscription on-demand service, and enhance both its existing $4.99 ad-free (Pandora One) and core ad-supported service. The delta in intrinsic value is driven by ad revenue and Pandora One subs assumptions: $1.9B vs. mgmt.'s $2.4B for 2020E. High-end assuming higher RPM from ad load, video ad units (in exchange for replays) and possibly higher overall listening. We remain on the sidelines, given the highly competitive environment for music services, and ahead of actual execution."
Shares of Pandora closed at $14.10 yesterday.
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