Two Reasons Pandora Bulls Might Lose The Long-Term Battle

In a report published Monday, Axiom Capital Management analyst Victor Anthony initiated a Hold rating on shares of

Pandora Media Inc,P

noting there is a lot of uncertainty surrounding the company's future. Anthony offered two arguments that highlight uncertainty and clouds the long case.

Negative CRB Ruling A Possibility
The risks Pandora faces later this year from the CRB rate decision appear "well understood" by investors with a negative ruling impairing the stock while a rational ruling would keep management's focus on executing strategies the company laid out during its Analyst Day presentation. Anthony continued that most industry experts he had spoken to indicate an adverse ruling is a likely outcome, though it is not certain. As such, it is difficult to buy into the stock even at current depressed share prices that have lost nearly 60 percent from its highs.

Competitive Environment Continues To Toughen

According to Anthony, competition remains a key issue for Pandora with new entrants to the market pressuring the company's growth. The analyst noted that every year Pandora faces a new online streaming competitor, this year being TIDAL, backed by several notable music superstars including Jay-Z and Madonna. Anthony added that a broader issue is whether subscription-based, on-demand models are gaining appeal at a point when Pandora has backed away from pursuing this model.

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