Wedbush's Pacther Lifts Estimates On Pandora Amid Q1 Beat

In a report published Thursday, Wedbush analyst Michael Pachter commented on

(NYSE: p)'s first quarter results, noting a "solid" growth in listener hours and a better than expected local advertising and subscription revenue drove upside. Pachter noted that listener hours reached a record of 5.3 billion in the quarter, marking an increase of 11 percent over last year while local advertising accounted for over 24 percent of advertising revenue – ahead of expectations. Moreover, the company's reported adjusted EBITDA of $(21) million was better than his projected $(30) million and the company's guidance of $(35)-(30) million. Pachter continued that Pandora's management raised its full year guidance, once again. The company now expects its full year revenue to fall in a range of $1.16 to $1.18 billion, and full year adjusted EBITDA guidance was also boosted by $5 million to a range of $75 million to $85 million. The analyst pointed out that the company has at least met, if not exceeded, the high-end of its guidance for the past 12 quarters. As such, the analyst raised his non-GAAP fiscal 2015 revenue estimates to $1.18 billion from $1.16 billion, while raising his EBITDA estimates to $85 million from a previous $70 million. Pachter also raised his fiscal 2016 revenue estimates to $1.46 billion from $1.45 billion and now expects the company to report an adjusted EBITDA of $137 million next year, up from prior estimates of $131 million. Despite the improved outlook, Pachter stated that investors will remain focused on the outcome of the Copyright Royalty Board rate determination which is expected late this year. The analyst argued that Pandora has the "better side" of the argument in the royalty hearing and the CRB will set rates closer to Pandora's case for fair market value. Bottom line, investors may be discounting Pandora shares under the assumption that its royalty structure will rise materially for the foreseeable future, an outcome that Pachter does not share. Shares remain Outperform rated with an unchanged $27 price target.