Pandora Upgraded Earlier on Substantial Long Term Ad Opportunities, Cowen

Cowen upgraded Pandora P early Wednesday from Market Perform to Outperform. The price target on Pandora was raised from $15 to $22, signaling a 35 percent potential upside from current levels. Cowen analysts John Blackledge and Thomas Champion cited rising listening hours, increasing number of audio ads and moderate pricing increases over the next five years for the upgrade. Blackledge and Champion estimate audio ad revenues to increase from $293 million in FY2014 to $1.8 billion by FY2019. The current number of audio ads while streaming Pandora equates to approximately one minute of advertising per hour of listening. Cowen's analysts expect this to rise to approximately four to five minutes per hour over time, generating significantly more revenues as Pandora's focus from digital ads to more profitable audio ads takes form. Pandora's increase in total listening hours are expected to be attributed to higher smartphone adoption, integration with car audio systems and emerging players. Internet radio listening hours are expected to increase 14 percent between FY2014 and FY2019. Blackledge and Champion stated this was a conservative forecast and took into consideration a successful launch of Apple's AAPL iRadio. Cowen believes iRadio's launch, slated for this fall, presents a "moderate" risk to Pandora's business model. Pandora jumped 3.5 percent from yesterday's close of $16.41 to $17.00 at the open.