Analysts are weighing in with a commentary on the internet movie-streaming giant Netflix, Inc. (NASDAQ:NFLX) and internet radio giant Pandora Media Inc (NYSE:P), following recent announcements.
Canaccord analyst Gregory Miller reiterated a Buy rating on shares of Netflix, Inc. (NASDAQ:NFLX), with a price target of $120, following the news that the company will be raising the price of its most popular (2-stream) offering $1 from $8.99 per month to $9.99 per month.
Miller noted, “Although the prior price increase was not executed flawlessly, we believe the business has in fact demonstrated the capability to hold such price increases. With the flood of additional and increasingly original content that has been introduced since that time, we believe yet another price increase could in fact hold and be beneficial for shareholders, as it implies the long-term price trajectory could be greater than initially indicated by management.”
“While the initial stock reaction has been positive this afternoon, should the increase be officially announced, it may be cause for concern in the near term in terms of net additions. We remind investors that management ultimately attributed weakerthan-expected 3Q14 domestic subscriber net additions to the 2014 price increase, which management believed was initially offset by the release of Orange Is the New Black season two,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gregory Miller has a total average return of 6% and a 54.2% success rate. Miller has a 54.2% average return when recommending NFLX, and is ranked #616 out of 3772 analysts.
Pandora Media Inc
Wedbush analyst Michael Pachter came out with a cautious stance around Ticketfly acquisition by Pandora. The analyst reduced his price target for Pandora to $26, from his earlier target of $27, while reiterating an Outperform rating on the stock. As a reminder, Pandora will acquire Ticketfly, a ticket agency focused on middle-market concerts, for $450 million in a cash/stock transaction.
Pachter wrote, “While we see some strategic fit, we think that Pandora could have achieved most of the benefit by partnering with Ticketfly. We see little value added for Pandora beyond promoting artists, and note that Pandora has limited experience or aptitude in promoting or hosting concerts. Rather than spend $450 million (10% of Pandora’s market capitalization), we believe that Pandora could have achieved most of the benefits by simply partnering with Ticketfly and sharing revenue.”
Furthermore, “With only $55 million in revenue, we think that Ticketfly commanded a premium that far exceeds its value. Even if Pandora were to double revenues, we estimate that EBITDA would be no more than 20%, suggesting that Pandora paid at least two to four times what Ticketfly would command from a competitive bid. Our model assumes zero contribution in 2016.”
“We are lowering our price target $1 to $26 to reflect share dilution, reduced cash, and limited profit potential from the acquisition. We continue to think that Pandora users should grow, and we think it appropriate to value the company based on its number of users,” the analyst concluded.
According to TipRanks.com, analyst Michael Pachter has a total average return of -1.8% and a 45% success rate. Pachter has a 9.7% average return when recommending P, and is ranked #3249 out of 3772 analysts.
Out of the 31 analysts polled by TipRanks, 21 rate Pandora stock a Buy, 9 rate the stock a Hold and 1 recommends a Sell. With a return potential of 17%, the stock’s consensus target price stands at $23.84.