Pandora's Direct Licensing Deals 'Pave The Way For Product Diversification, Int'l Expansion'

Wedbush’s Michael Pachter expects Pandora Media Inc P to continue to see losses into early 2917, as the company invests in international expansion and on-demand music.

Pachter reiterated an Outperform rating on the company, with a price target of $15.

The On-Demand Offering

“In addition to its new live events venture, on-demand subscription services and international expansion are Pandora’s strategic priorities,” the analyst mentioned.

Pachter believes Pandora Media would be able to convert 2 million Pandora One subscribers to on-demand, while attracting another 1 million to 2 million U.S. on-demand subscribers and signing up 1 million to 2 million international on-demand subscribers in 2017, if the company is able to successfully launch a competitive offering on time.

Related Link: Critical Barron's Article Weighs In On Pandora's Recent Stock Movements

Agreements With Major Labels

“We think the deals Pandora announced Tuesday are the first of several steps the company must take to ensure its ability to expand margins and return to profitability over the long-term. For now, all eyes are on execution,” the analyst went on to say.

The company announced on September 13 that it had entered into direct licensing agreements with two of the three major music labels, while the third one seems ready to sign a deal by the year-end to offer subscription based on-demand services domestically.

Pandora Media has also entered into agreements with Merlin Network and other independent labels.

“We think that by introducing a hybrid on-demand and Internet radio service, Pandora is setting itself up to compete effectively with Spotify,” Pachter added.

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