Piper Jaffray Analysts Like Pandora Stock After Traveling With Company

Piper Jaffray analysts James M. Marsh and Stan Meyers recently traveled with Pandora Media Inc P and left feeling more bullish on the company’s outlook.

In a report published Monday, they note that the investors’ focus was put on the CRB proceedings, listenership and monetization. Based on the firm’s review of testimonies from Pandora, iHeartRadio and Sirius XM Holdings Inc. SIRI, the experts see “the royalty rates set below 20 cents per 100 songs (with direct deals supporting their position).”

On the listenership front, Marsh and Meyers expect Pandora to ramp up its marketing to drive listenership in the second half of the year. They anticipate ad growth will enjoy of some tailwinds, “with a seasonal pickup and improvement in productivity of recently hired sales force.”

Finally, regarding monetization, they see the company enhancing its sell-through rate, “continuing to push its valuable sponsor listenership, and deploy its own programmatic ad exchange.”

The firm notes that, while the CRB decision certainly remains a “temporary overhang,” the analysts see management proactively de-risking the company’s model. Consequently, they believe the stock remains undervalued. Thus, the firm reiterated and Overweight rating and $23.00 price target on the stock.

CRB Process Update

On top of their analysis and recommendation, the analysts provide an update regarding the CRB process, which should lead to a decision in a few months. They note that:

• “SoundExchange's case seems to have limited ground,” since Pandora’s service is much more passive and radio-like than interactive.
• Piper Jaffray believes labels could settle ahead of the decision.
• The firm thinks Pandora can adapt, even if the decision is not favorable to the company.