MKM On Pandora: 'We Would Be Long' Into Year End

In a report rolled out Tuesday, MKM Partners Managing Director Rob Sanderson reiterated a Buy rating on shares of Pandora Media Inc P, while raising his price target from $23 to $25, as he expects continued outperformance into the end of the year, ahead of the CRB decision in December.

The firm believes that under a “status quo” result (i.e., rates continuing to rise 7-8 percent per year thru 2020), the stock could be worth $35 in 2016. The analyst notes that, “while the decision is a material risk event,” he thinks this outcome is the most likely. In fact, the firm assures it still sees “an asymmetric risk-reward overly biased to a highly unfavorable ruling.”

However, the 12-month price target of $25 per share "assumes a high discount rate (35%)" on MKM's 2020 EPS power estimate, "which assumes a slightly worse rate outcome than ‘status quo.'"

Some Estimates

While most figures remain relatively unchanged for the year, second-quarter results led to some tweaks. MKM analysts are now anticipating lower EBITDA for the third quarter and higher EBITDA in the fourth, as the timing of market spending seems to have changed.

“The tax outlook is difficult to predict as P turns to GAAP profitability,” so they expect investors to focus on EBITDA.

For the remainder of 2015, the firm is modeling third-quarter earnings of $0.10 per share on revenue of $313.7 million; fourth quarter EPS of $0.22 on sales of $351 million; and full 2015 EPS of $0.25 on revenue of $1.1811 billion.

For 2016, they are projecting EPS of $0.51 on revenue of $1.4609 billion, while, for 2017, they expect EPS of $0.95 on revenue of $1.84 billion. By 2020, MKM sees EPS power of $2.75.