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Does The Street Hate Pandora's Soul?

April 23, 2015 2:00 pm
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Pandora Media Inc (NYSE: P) reports Q1 financial results Thursday after the market close.

The Estimize consensus was for EPS of $(0.14) with revenue of $226.33 million. The Wall Street consensus expected EPS of $(0.16) with revenue of $225.37 million.

As the company headed into its earnings release, the stock was up 1.03 percent to $17.69.

While the stock may have been moving up Thursday, some analysts had less than positive views on the stock.

Albert Fried & Company has maintained a bearish view of the stock for some time. Analyst Richard R. Tullo felt that “Pandora is a sell and the easy long money was already earned by value investors.”

Tullo acknowledged that the company “offers a great service and revenue growth potential,” however “great Companies do not always offer attractive returns for equity investors.”

Addressing the music industry, Tullo felt that as “content is digitized and as content competes digitally for audience, content alone is no longer King – experience is King. We think current music industry economics are unsustainable as Record labels take as much as 50 percent of the revenue generated by artists which when combined with expenses, records offer little income for artists.”

Over the longer term, Tullo noted that the addition of Tim Leiweke (former AEG CEO) and Roger Faxon (former EMI CEO) to Pandora’s board is beneficial” as the company “needs to address industry revenue concerns.”

Albert Fried & Company expected EPS of $(0.19) and maintained a $16 price target on the stock with an Underweight rating.

At BMO Capital Markets, Analyst Edward S. Williams anticipated receiving “an update on the ongoing CRB process to determine the new royalty rate, which will take effect in 2016.”

Williams expected revenue of $223 million versus $180 million a year ago and adjusted EBITDA of a loss of $31.8 million versus a loss of $8.3 million a year ago and EPS of $(0.17).

“We expect to see continued growth in hours streamed in 2015 and beyond,which should propel the platform. As 2015 progresses and as we gain clarity on the outcome of the CRB process, we expect to see the shares of Pandora trade higher,” according to Williams.

BMO rated Pandora Outperform with a $20 price target.

Maxim Group analyst John Tinker was less enthusiastic and expected decelerating revenue growth and would only revisit the stock “on weakness or after content cost clarity has been established following CRB negotiations in December.”

Tinker expected revenue of $225 million for Q1and EBITDA loss of $14.7 million.

Maxim maintained a Hold rating an no price target.

Wedbush analyst Michael Pachter expected “revenue of $225 million, Adjusted EBITDA of $(30) million, and EPS of $(0.16), roughly in line with consensus of $225 million, $(31) million, and $(0.16), respectively.”

Patcher was more bullish on the stock and expected market share gains in 2015 which would generate more advertising capacity.

“Investors remain focused on the outcome of the Copyright Royalty Board rate determination, expected late this year. We believe that Pandora has the better side of the argument in its royalty hearing, and expect the CRB to set rates closer to Pandora’s case for fair market value,” Patcher recently wrote.

Webush maintained an Outperform rating and $27 price target.

B Riley & Co felt it wise to “stay on the sidelines” pending the CRB negotiations and maintained a Neutral rating on the stock.

The firm expected ProForma revenue of $224.4 million and AEBITDA of $(31.2) million, both slightly better than consensus.

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