Ads, Strategic Value Make Pandora A Buy With Near 100% Upside, Says Pacific Crest

In a report published Tuesday, Pacific Crest analyst Andy Hargreaves maintained an Overweight rating and price target of $22 on

, while recommending buying the stock, given that is has "substantial room for upside." The analyst believes that given that the stock is currently trading at the bottom of its historical EV/S range and with ongoing growth in ad sales and potential for recognition of the company's strategic value as a mobile advertising platform, there could be significant upside potential to the stock. Pandora is expected to report its revenue and adjusted EBITDA for Q2 in-line with the guidance and the consensus. Users and total listener hours are also expected to post growth for the quarter. In addition, the analyst expects the company to have hired 15 sales reps during Q2, bringing the total hired this year to 91. On the other hand, the launch of Apple Music is likely to impact listener hours for Pandora. The Q3 listening hour estimate has, therefore, been reduced from 5.51 billion to 5.36 billion. Since this reduction does not affect the ad sales estimate, the 2015 adjusted EBITDA estimate has been raised from $80 million to $87 million. "We continue to believe Pandora is defensible versus on-demand services and see ample room for further growth in listening hours from share gains from traditional radio," analyst Hargreaves stated, adding, "Pandora's extraordinary mobile engagement and its unique combination of audio and display ads make it a rare property capable of delivering brand messages to mobile consumers, in our view."