Pandora's Five-Year Plan 'Ambitious,' Morgan Stanley Says

• Pandora Media Inc P appreciated 8.45 percent on February 11, ending the day at $9.11.
• Morgan Stanley’s Benjamin Swinburne has maintained an Equal-weight rating on the company, with a price target of $12.
• While mentioning that the company intended to implement an aggressive reinvestment plan, Swinburne noted that Pandora Media’s five-year plan appeared “ambitious.”

Analyst Benjamin Swinburne stated that the company’s 2016 guidance was “lighter than expected” due to Pandora Media new growth initiatives, with the aim of expanding into liver entertainment/ticketing, subscription on-demand music and new international territories.

“Due to heightened investment spend, Pandora guided to a surprising large $60-80M adj. EBITDA loss in 2016, well below our prior expectation of a ~$36M adj. EBITDA gain,” Swinburne went on to say.

Although once adjusted for the cost of investments in a new on-demand music service, the guidance for core internet radio profitability is mostly in-line with the prior estimate, although the core topline growth guidance for 2016 is below the estimate, possibly due to conservative volume growth expectations.

“As a result of these investments, Pandora believes that in 2020 it will be able to generate $4B in revenue and ~$600M in non-GAAP operating profit, with projected revenues ~70% above our forecast and projected non-GAAP operating profit 20-25% ahead of MSe,” according to the Morgan Stanley report.