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Wedbush Reiterated Outperform on Pandora (P) Following CRB Determination

December 17, 2015 8:32 AM

Wedbush reiterated an Outperform rating and $26.00 price target on Pandora (NYSE: P) following the Copyright Royalty Board's rate determination for the company. The 2016 rate for Pandora’s ad-supported service will be $0.0017 compared with the 2015 rate of $0.0014, and the subscription rate will be $0.0022 compared with the 2015 rate of $0.0025.

Analyst Michael Pachter commented, "On Wednesday evening, the Copyright Royalty Board (“CRB”) determined rates that Pandora will pay to music labels from 2016 – 2020. While the blended rate determination was higher than we had estimated, it was in line with consensus estimates with a modest escalator, so should be largely viewed as a favorable outcome for Pandora. The 2016 rate for Pandora’s ad-supported service will be $0.0017 compared with the 2015 rate of $0.0014, and the subscription rate will be $0.0022 compared with the 2015 rate of $0.0025. Pandora’s projected blended rate for 2016 is $0.00176, a 15% increase over its projected blended rate for 2015. As expected, gross margin for the ad-supported service will decrease in 2016. However, gross margin for the subscription service will actually increase year-over-year, but will be lower than ad-supported gross margin overall. We anticipate that this mix shift will incentivize management to drive subscriber growth."

For an analyst ratings summary and ratings history on Pandora click here. For more ratings news on Pandora click here.

Shares of Pandora closed at $13.44 yesterday.

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