Macquarie Boosts Pandora Target On 'Enormous Potential' Of $0.99 Daily Pass

• The share price of Pandora Media, Inc. (NYSE: P) has risen by almost 14 percent in the last six months.
• Macquarie’s Amy Yong has maintained a Neutral rating on the company, while raising the price target from $17 to $19.
• Pandora Media has launched the One Day Pass, which offers users ad-free music at US$0.99 per day. This service has intensified competition in the music streaming segment.

According to the Macquarie report, “This non-committal, micro-transaction service could eventually attract a large pool of users, drive awareness to the service, and diversify its revenue stream.”

Yong believes that this service has “enormous long term potential” and could add $1-$2 to the share price, given that Pandora is currently the only major platform to offer a day pass.

“The ability to drive activations could be meaningful and come from both new and existing listeners,” Yong said, with 261 million registered uses and 79 million active users on Pandora as of 2Q.

Yong expects the day pass to eventually cater to a niche market for selective or price sensitive users. The company is also offering 24 hours of ad-free music to celebrate its 10th anniversary on September 9.

The day pass and the anniversary event are expected to lead to increased activity in 3Q, with social media feedback suggesting that active users could rise by “a few million within the first week.”

The Pandora One Day program is expected to boost the company’s revenue for 2016 and 2017, and has the potential to “drive additional growth to Pandora One where the subscriber count is small.”