Market Overview

Could SiriusXM Still Buy Pandora?

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Could SiriusXM Still Buy Pandora?

Merger chatter around Sirius XM Holdings Inc. (NASDAQ: SIRI) and Pandora Media Inc (NYSE: P) largely fizzled with the latter’s strategic investment.

But some on the Street still see the potential for a buyout.

The Rating

BMO Capital analyst Daniel Salmon upgraded Pandora to Outperform and lowered his price target from $11 to $7.

The Thesis

SiriusXM’s $480 million investment deal precludes incremental purchases of Pandora shares for a little over a year. But the terms leave room for an outright buyout, Salmon said in  a Thursday note. (See Salmon's track record here.)

SiriusXM could be incentivized by the opportunity in Pandora to transition from satellite to internet protocol content delivery, integration of a strong advertising business and access to a wider audience to leverage in label and automaker negotiations, the analyst said. 

The takeover possibility — just 16 percent, by Salmon’s estimates — drives BMO’s strongest bull case for a $12 Pandora value.

But Salmon sees greater likelihood in alternatives. Considering potential trend permutations in active-user growth, subscription sales and ad spending, BMO sees:

  • a 19-percent probability of $10 valuation;
  • a 22-percent probability of $7 valuation;
  • a 23-percent probability of $4.50 valuation;
  • and a 20-percent probability of $3 valuation.

Success in Pandora’s subscription services, expected boosts in audio ads and expansion of non-music content offerings justify BMO’s new Buy rating, Salmon said. 

“We generally agree with consensus that P may lack near-term catalysts, but believe some underlying secular trends and changes to the business model are being underappreciated."

Price Change

The ratings change prompted a 4-percent spike in Pandora’s stock. At the time of publication, shares were trading up 3.2 percent at a rate of $5.09, while Sirius traded marginally higher at $5.41.

Related Links:
JPMorgan Downgrades Pandora, Says Turnaround Will Take Patience
Pandora's Turnaround Could Take Some Time; Stifel Downgrades

Latest Ratings for P

DateFirmActionFromTo
Nov 2018Canaccord GenuityDowngradesBuyHold
Oct 2018Goldman SachsDowngradesBuyNeutral
Oct 2018BMO CapitalDowngradesOutperformMarket Perform

View More Analyst Ratings for P
View the Latest Analyst Ratings

 

Related Articles (SIRI + P)

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Posted-In: BMO Capital Daniel Salmon Pandora SiriusXMUpgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
GPIMorgan StanleyMaintains60.0
GTMorgan StanleyMaintains6.0
GTXMorgan StanleyMaintains2.0
GLPIMorgan StanleyMaintains35.0
FMCMorgan StanleyMaintains90.0
View the Latest Analytics Ratings
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