Analysts are weighing in on the coffee giant Keurig Green Mountain Inc (NASDAQ:GMCR) and online radio giant Pandora Media Inc (NYSE:P), as news of Keurig Kold launch in Canada, and favorable ruling for Pandora in royalties’ payment sent shares of both companies soaring.
Keurig Green Mountain Inc
Shares of Keurig Green are on the rise today after the company announced the launch of Keurig Kold brewing system in Canada at a reduced price.
Subsequently, Susquehanna analyst Pablo Zuanic reiterated a Neutral rating on shares of Keurig Green, with a price target of $46, which represents a potential downside of 13% from where the stock is currently trading.
Zuanic wrote, “After the stock bounce post fiscal 4Q15 on 11/19, brewer sales in the Dec qtr. will be a big driver of sentiment next time around (1Q16 out in early Feb), especially with management guiding for higher brewer sales yoy for the Dec qtr. (after four consecutive quarters of yoy decline). Our store surveys point to aggressive promotions at Wal-Mart stores (given brewer sales are booked when shipped, this may flatter 1Q16) with the K200 (launched this past spring) being sold at $89.99 (vs. the normal list price of $119.99 at most stores), and to also visible promotions at selected supermarkets (at Shop Rite, for example, the K200 is at $79.99).”
The analyst concluded, “Our concerns with GMCR continue to mount (our Neutral rating notwithstanding). The biggest risk to the upside in the short-term is KO increasing its current stake or buying the company.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Pablo Zuanic has a total average return of -1.0% and a 50.0% success rate. Zuanic has a -36.3% average return when recommending GMCR, and is ranked #2610 out of 3641 analysts.
Out of the 10 analysts polled by TipRanks in the last 3 months, 8 rate Green Mountain stock a Hold, 1 rates the stock a Hold and 1 recommends a Sell. With a return potential of 3.16%, the stock’s consensus target price stands at $54.44.
Pandora Media Inc
In a research report released today, Wedbush analyst Michael Pachter reiterated an Outperform rating on shares of Pandora, with a price target of $26, after the company issued a press release stating that the Copyright Royalty Board is likely to consider a single rate structure when it delivers its ruling on the fair market royalty to be paid for access to songs.
Pachter commented, “We believe that Pandora has the better side of the argument in its CRB case, as its Merlin deal provides evidence that rates lower than those sought by SoundExchange reflect fair market value and the statement by the Register of Copyrights once again supports this view. We believe that even if Pandora were to receive an adverse ruling from the CRB, it has sufficient leverage to allow it to negotiate favorable rates directly with the record labels. Should the CRB rates increase, additional subscription revenue from an on-demand service (added through its recent Rdio acquisition) would likely offset some of the lost margin on ad-supported radio listening; however, should the CRB rates decrease, Pandora would use the additional revenue for further investment.”
“Pandora should be able to grow revenues by increasing usage (as users migrate to in-car listening), increasing the frequency of ad delivery (from 90 to 150 seconds per hour) and increase ad rates (by increasing the mix of higher value local ads). Once the CRB determines the appropriate royalty rate, we expect investor focus to shift to revenue growth, which we expect to materially outpace royalty growth, which will be enhanced by an additional revenue stream from an on-demand subscription option in 2017,” the analyst added.
According to TipRanks.com, analyst Michael Pachter has a total average return of -4.2% and a 40.6% success rate. Pachter has a -21.4% average return when recommending P, and is ranked #3454 out of 3641 analysts.
Out of the 19 analysts polled by TipRanks in the last 3 months, 9 rate Pandora Media stock a Buy, 8 rate the stock a Hold and 2 recommend a Sell. With a return potential of 37.58%, the stock’s consensus target price stands at $19.