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Can Pandora's New Management Team Change Analysts' Tune?

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Can Pandora's New Management Team Change Analysts' Tune?

Shares of Pandora Media Inc (NYSE: P) collapsed nearly 20 percent and traded notably below its 52-week low of $6.76 early Friday after the company reported third-quarter results.

But not all of Wall Street is ready to throw in the towel, including Morgan Stanley's Benjamin Swinburne, who maintains an Overweight on Pandora's stock with an unchanged $12 price target.

Pandora's third quarter was mostly in-line with expectations, but management's outlook was "light," Swinburne said in a Friday note. (See Swinburne's track record here.) Advertising revenue trends remain poor, as declines in ad hours continue to hover in the 16 to 17 percent year-over-year range versus expectations for a decline of 11 percent, the analyst said. 

Pandora's woes can be attributed to many users leaving both the free and subscription service for competing platforms. Advertisers are pulling back on spending for multiple reasons, but mostly due to the company's advertiser tools falling behind other larger digital platforms, Swinburne said. 

But a new management and executive team led by recently appointed CEO Roger Lynch might have the answers to right the ship — although patience is certainly needed, according to Morgan Stanley. Sirius XM Holdings Inc. (NASDAQ: SIRI)'s chairman Greg Maffei, CEO James Meyer and CFO David Frear were also named to Pandora's board as part of the satellite radio company's $480 million strategic investment.

Pandora's new management team will be looking to tackle two pressing issues: stabilizing the user base and declines in ad hours and investing in the necessary technologies to improve the business, Swinburne said. 

"We expect that these improvements will take time, that there is no silver bullet and that investors will likely have to wait until [the second half of 2018] to see initial fruits of new management's initiatives and investments," the analyst said. 

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Latest Ratings for P

DateFirmActionFromTo
Nov 2018DowngradesBuyHold
Oct 2018DowngradesBuyNeutral
Oct 2018DowngradesOutperformMarket Perform

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Posted-In: Benjamin Swinburne digital advertising Morgan Stanley Pandora Roger LynchAnalyst Color Reiteration Analyst Ratings Best of Benzinga

 

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