Congressional Hearing Positive for Pandora (P), Will Send Shorts and Apple Packing - Analyst
Albert Fried analyst Rich Tullo said he thinks the legislation will lower Pandora's long term content costs and triggers short covering as roughly 57% of P’s float is sold short.
"Based on our observations of the testimony we think roughly 60% of the Congressional Judiciary members are for the bill and/or are undecided. It is likely a vote on the bill could occur between March and June F2014E. In our view, comprehensive reform which includes terrestrial radio could get sucked into the bill as several members of Congress who we think are undecided are seeking to expand content royalty payments from terrestrial radio which is less than 2% of terrestrial radio industry revenue."
The panelists who are against the bill - Mr. Jamm, Mr. Hubbe and Prof. Issen -seemed to make vocal arguments which could backfire if Congress needs to alienate special interest groups to prove a point and regain credibility, Tullo comments.
The analyst said if anything the testimony shows that Apple (Nasdaq: AAPL) can not be serious if it decides to enter IP Radio streaming as the business model in its current form cannot offset the $7.5 billion in revenue APPL generates from iTunes.
Pandora is expected to report results on December 4, 2012 after the market close.
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Shares of Pandora are up 8.5 percent to $8.88.