Top analyst Michael Graham of Canaccord recently hosted a fireside chat with Pandora Media Inc (NYSE:P) CFO and interim CEO Naveen Chopra at his annual Growth Conference to dig a little deeper into second quarter results.
The discussion focused on four major Pandora initiatives aimed at expanding its current 76 million monthly and 100 million quarterly listeners, including: content expansion, device support, marketing automation, all with the effort to bolster re-engagement practices. Following the presentation, the analyst is out with a bullish research note highlighting meaningful takeaways for P’s prospects down the line.
Graham underscores that though the company struggled with subscription conversion, the music streaming platform is making strides to strengthen its weaknesses in the coming year, explaining, “Pandora is on the way to having a detailed economic model for each listener, understanding how to maximize the expected value individually. Pandora is making technology investments to accomplish this, and while no time frame was provided, our guess is that heading into next year, the company will be stronger here,” writes the analyst, adding that in fact, “it might be more efficient in the short term to gain new listeners for the ad-supported product and then focus on retention/conversion to subscription over time.”
The key to succeeding in re-engaging users lies in “a more technology-driven, targeted approach to outreach and push notifications […] Over time, Pandora believes it can improve subscription economics partially through more efficient navigation of app-store fees,” states the analyst. Graham also sees company plans to sell video and audio inventory of programming will provide “A major potential tailwind to blended CPM growth is the opportunity to increase video ad inventory,” but notes that on the positive side, “The company is developing new product features with this thought in mind.”
In regard to expanding content and device support, the company has an opportunity to not only provide a wide range of programming from news to sports but to also “meet users where they are” by integrating Pandora with a staggering 2,000 types of devices. Additionally, looking ahead, though the platform’s intent to invest $480 million in Sirius has not closed just yet, the analyst finds the P team “optimistic” about the “strategic” advantages waiting in the wings.
As such, on the heels of the conference, the analyst maintains a Buy rating on P stock with a price target of $14.00, representing a 66% rise above current trading levels.
Michael Graham has a very good TipRanks score with a 60% success rate and a high ranking of #134 out of 4,628 analysts. Graham realizes 13.7% in his annual returns. When recommending P, Graham earns 3.3%.
TipRanks analytics showcase P as a Buy. Out of 23 analysts polled by TipRanks in the last 3 months, 12 are bullish, 10 are sidelined, with 1 bearish on Pandora stock. With an upside potential of 27%, the stock’s consensus target price stands at $10.78.