Market Overview

Do Analysts Like Pandora's Rdio Acquisition?

Do Analysts Like Pandora's Rdio Acquisition?
  • Shares of Pandora Media Inc (NYSE: P) have fallen sharply from its 52-week high of $22.60 in early October and are now lower by nearly 35 percent over the past month.
  • Pandora said it will pay $75 million to acquire the assets of bankrupt Rdio.
  • Axiom's Victor Anthony suggested that Pandora's acquisition "may be too late" while Oppenheimer's Jason Helfstein pointed out the acquisition could offer a "hedge" against its ad-based model

Shares of Pandora's were trading lower by more than 4 percent Tuesday morning after the company announced on Monday that it has acquired key assets of Rdio, a streaming music platform that has gone bankrupt, for $75 million.

Here is how some of Wall Street's top analysts reacted to the acquisition.

Axiom: ‘May Be Too Late'

Victor Anthony commented in a note that Pandora has been working on creating an on-demand service in an attempt to re-gain lost market share from competitors including Spotify and Apple Music. In fact, the analyst pointed out that conversations with millennials, Pandora's key target demographic, has shown that "rising competition has dented [Pandora's] growth of users and listener hours."

Related Link: Analyst Takes 'Plunge' On Pandora

Anthony said Pandora's acquisition or Rdio's technology assets and intellectual property is meant to "accelerate progress" towards an on-demand model, which is expected to launch in late-2016. However, the analyst questioned "how successful Pandora can be" given the presence of "already established on-demand players." In addition, it is "unclear" how Pandora can realize success in converting its 78 million monthly active users to a new service.

Bottom line, Anthony noted that "the market is near saturation and it may be too late" for Pandora to enter the field.

Shares remain Hold rated with a price target lowered to $14 from a previous $20.

Oppenheimer: ‘Hedges Bet' Against Advertising Model

Jason Helfstein of Oppenheimer commented in a note that Pandora's acquisition consists of just Rdio's technology and talent as several key employees will be offered new roles at Pandora. As such, the analyst suggested that Pandora is continuing to invest in assets that offers the company a more diversified revenue stream, specifically away from an ad-supported model.

Helfstein said Pandora's acquisition marks its first foray into an on-demand streaming platform, similar to Spotify and Apple Music. However, an official launch isn't expected until the end of 2016.

Finally, Helfstein pointed out that the acquisition of Rdio offers the company an acceleration to the international market (Rdio operates in over 80 countries), investors will nevertheless view the acquisition as "neutral to slightly negative."

Shares remain Perform rated with no assigned price target.

Latest Ratings for P

Nov 2018DowngradesBuyHold
Oct 2018DowngradesBuyNeutral
Oct 2018DowngradesOutperformMarket Perform

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Posted-In: Apple Music axiom Jason HelfsteinAnalyst Color M&A Price Target Analyst Ratings Tech Best of Benzinga


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