Pandora (P) PT Lowered to $14 at Credit Suisse
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Credit Suisse analyst Stephen Ju lowered his price target on Neutral-rated Pandora (NYSE: P) to $14.00 (from $16.00) after previewing Q3 and updated their model on the company's new business.
Ju commented, ": As Pandora embarks on a new chapter of its growth, we weigh in with a clean, rebuilt model which layers in the new on-demand product and also allows for sensitivity analysis based on the conversion of free ad-supported users to paying subscribers. Given the higher expected LPMs as it signed direct deals with the record labels, our 2017 Adj. EBITDA estimates come down significantly to a loss of $86mm (vs. prior profit of $68mm). And between royalties to the labels as well as platform fees, we do not believe on-demand will contribute meaningfully to the bottom line until the platform fees move to ~15% starting in 2018. Hence it looks like 2017 will be a period of investment, and as the new $5 subscription product Pandora Plus was launched mid-September, the higher LPM also applies to 4Q16 as well, and we expect Pandora to decrease its 2016 profit guidance as a result."
Shares of Pandora closed at $12.83 yesterday.
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