Pandora (P) Remains Battleground Stock Amid Streaming Caps, High Costs, and Competition
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Price: $108.55 -1.3%
Rating Summary:
10 Buy, 24 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
10 Buy, 24 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Yesterday evening, streaming radio service Pandora (NYSE: P) shocked Wall Street when it announced that it was placing a cap on listener hours. The change takes effect in March and would limit mobile listening to 40 hours per month. The change does not impact desktop, laptop, or Pandora One users, or affect users who listen to Pandora through an automotive integration.
Pandora said the change was due to the absence of ad sales and hopes to compensate for rising costs of music content. Interestingly recent trends have indicated improving mobile monetization, noted analysts at Wedbush, who said the move was a "surprise".
"Notwithstanding solid growth in mobile monetization, the cap indicates to us that mobile advertising growth is once again lagging behind royalty payment growth, suggesting weakening demand for mobile advertising. In our view, had mobile growth continued at similar rates, to the rates in Q3:13, the cap would not have been necessary," said analyst Michael Pachter.
Pandora has years of experience with usage caps and prior to its 2012 IPO Pandora posted strong double digit revenue growth with this system in place, noted analyst Rich Tullo of Ablbert Fried. So, in some way the announcement could be a non-event and may prove to be a benefit to shareholders. However, with a competing Apple service rumored to be in the works, doubts about Pandora’s growth prospects abound, though not in all circles.
Of the 29 analyst tracked by Streetinsider.com, 15 rate Pandora Buy, 10 rate in Neutral, and 4 have sell ratings on the stock.
Wells Fargo analyst Peter Stabler is among those with a positive view of the stock. He believes Pandora's unique technology and strong portfolio of advertising products is highly differentiated and defensible, even against Apple.
On the other side of the augment, Pachter said he doesn't see significant room for share price appreciation beyond current levels due to a lack of near-term profitability and continuing uncertainty about competition.
Amid the debate, one thing remains clear - Pandora is likely to remain a battleground stock in the days and weeks ahead.
Shares of down 5.4 percent currently to $12.05.
Pandora said the change was due to the absence of ad sales and hopes to compensate for rising costs of music content. Interestingly recent trends have indicated improving mobile monetization, noted analysts at Wedbush, who said the move was a "surprise".
"Notwithstanding solid growth in mobile monetization, the cap indicates to us that mobile advertising growth is once again lagging behind royalty payment growth, suggesting weakening demand for mobile advertising. In our view, had mobile growth continued at similar rates, to the rates in Q3:13, the cap would not have been necessary," said analyst Michael Pachter.
Pandora has years of experience with usage caps and prior to its 2012 IPO Pandora posted strong double digit revenue growth with this system in place, noted analyst Rich Tullo of Ablbert Fried. So, in some way the announcement could be a non-event and may prove to be a benefit to shareholders. However, with a competing Apple service rumored to be in the works, doubts about Pandora’s growth prospects abound, though not in all circles.
Of the 29 analyst tracked by Streetinsider.com, 15 rate Pandora Buy, 10 rate in Neutral, and 4 have sell ratings on the stock.
Wells Fargo analyst Peter Stabler is among those with a positive view of the stock. He believes Pandora's unique technology and strong portfolio of advertising products is highly differentiated and defensible, even against Apple.
On the other side of the augment, Pachter said he doesn't see significant room for share price appreciation beyond current levels due to a lack of near-term profitability and continuing uncertainty about competition.
Amid the debate, one thing remains clear - Pandora is likely to remain a battleground stock in the days and weeks ahead.
Shares of down 5.4 percent currently to $12.05.
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