Skip to main content

Market Overview

Does Apple Music Help Or Hurt Pandora? Morgan Stanley Has An Answer

Does Apple Music Help Or Hurt Pandora? Morgan Stanley Has An Answer

In a report published Thursday, Morgan Stanley analyst Benjamin Swinburne discussed why Pandora Media Inc (NYSE: P)'s risk to reward profile is improving despite growing competition and uncertainty regarding an upcoming Copyright Royalty Board (CRB) ruling.

Shares of Pandora remain Equal weight rated with a price target lowered to $17 from a previous $18.

According to Swinburne, Pandora is estimated to see a 2 to 3 percent dip in aggregate listening hours due to Apple Inc. (NASDAQ: AAPL)'s free trial of its streaming music service, Apple Music. However, the analyst added that hours will "largely bounce back" in the fourth quarter and that the launch of Apple Music on Android devices will have less of an impact to Pandora's listening hours when compared to iOS devices.

"Although we do believe that Apple Music is a superior product compared to iTunes Radio, the iTR launch in September 2013 had very limited impact on Pandora's reported listener hours," Swinburne wrote. "We do expect a bigger impact to hours than we saw with iTR, but in the broader context our changes to listening are relatively small, as we continue to believe listening will skew strongly to free over pay long term."

Related Link: Exclusive: How The Smashing Pumpkins' Billy Corgan Would Revolutionize The Music Industry

Swinburne continued that a 2.8 percent dip in Pandora's listening hours (which is a 2.5 percent total reported hours impact) would translate into less than a 1 percent decline in ad revenue in the quarter. In fact, given lower content acquisition cost due to few hours, Pandora's profitability could actually improve, the analyst added.

Finally, Swinburne suggested that downside risk in shares of Pandora remains "significant" given the low probably event the CRB raises industry rates to the point where the company can no longer operate at a profit. However, the analyst concluded that with more U.S. mobile users than Twitter, and a user base that is "healthy", the risk reward profile is "increasingly compelling," especially with shares trading at 2.0x times EV/2016E revenue. As such, "a lot of bad news" is likely priced in to the stock at current levels.

Latest Ratings for AAPL

Apr 2021Morgan StanleyMaintainsOverweight
Apr 2021Morgan StanleyMaintainsOverweight
Apr 2021Morgan StanleyMaintainsOverweight

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings


Related Articles (AAPL + P)

View Comments and Join the Discussion!

Posted-In: Apple Music Benjamin Swinburne Copyright Royalty Board CRBAnalyst Color Price Target Analyst Ratings Tech Best of Benzinga

Latest Ratings

ICADGuggenheimInitiates Coverage On24.0
SMBKRaymond JamesUpgrades27.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at