What’s in Store for Pandora Media Inc (P) and Glu Mobile Inc. (GLUU) Ahead of Q2 Earnings

Top analyst Michael Graham at Canaccord is shelling out mixed forecasts on two tech players before forthcoming second-quarter earnings showcases from Pandora Media Inc (NYSE:P) and Glu Mobile Inc. (NASDAQ:GLUU). On one hand, Pandora has Graham bullish despite antsy investors shying away from the stock, as he remains steadfast that Pandora’s reward offsets its transitional risk. However, less certainty backs Glu, which for the analyst shows signs of promise, but not enough unfailing potential to sway him to the bulls just yet.

Michael Graham has a very good TipRanks score with a 63% success rate and a high ranking of #110 out of 4,627 analysts. Graham realizes 14.4% in his yearly returns. When recommending P, Graham earns 5.1% in average profits on the stock. However, when suggesting GLUU, Graham forfeits 8.3%.

Let’s dive in:

Pandora’s Odds After Bottoming Out Actually Look Good

Pandora shares are slipping almost 5% in anticipation of its second-quarter date with destiny this evening, when the music streaming firm posts earnings that have investors trembling. Will it be time to strike luck and buy or will the print dictate a tale of transition and “new frontiers” for this stock? As far as Graham assesses the stock ahead of the earnings dice rolling, though a murky short-term swirls around a company caught in mid-transition, he nonetheless continues to advocate for Pandora’s success.

With investor fears at a high, the analyst believes impressing will not be such an uphill challenge for the company, and as such, he reiterates a Buy rating on shares of P with a $15 price target, which represents a 66% increase from where the stock is currently trading.

Graham explains, “Pandora is undergoing three major transitions with the product, management team, and ownership. With all of these moving parts, having a clear picture of what the next few quarters will hold is difficult. That said, after the stock bottomed following the Sirius investment, we generally see a favorable risk/reward profile, and believe expectations are low. It should be fairly easy for the company to provide a bullish subscription update, and this should be enough to keep supporting the stock.”

When it comes to strides made with Pandora Premium, where the firm initiated 1.3 million subscription trials in the 7 weeks following the beta launch, the analyst projects 1.5 million Premium trials have been initiated since the last slice of the earnings pie, bringing the total to 2.0 million. “We think having a number well above 1M would be important,” adds Graham.

In terms of ad-supported listener hours, of which there was a 9% annual pullback last quarter that led to ad revenue growth stalling to 1.4% year-over-year, the analyst sees a like-minded scenario for the second quarter, calling for a 10% dip in ad-supported hours coupled with ad revenue growth of 3%, thanks to 15% RPM expansion.

Moving forward, “We imagine that new management will be making some changes to the way Pandora operates, […]” concludes the analyst, asserting two key points of attention following the financial results: “1) amount of emphasis on subscription; and 2) the right level of investment/expense, perhaps heavily influenced by #1. Given that new management is probably still learning/investigating, we suspect that this Q2 update will be incremental relative to the last stated plan rather than setting a different direction.”

TipRanks analytics indicate Pandora as a Buy. Out of 24 analysts polled by TipRanks in the last 3 months, 13 are bullish on Pandora stock while 11 remain sidelined. With a return potential of nearly 35%, the stock’s consensus target price stands at $12.09.

Glu Mobile Is a Story of Cautious Optimism

Glu Mobile is a true comeback player of Wall Street, having rebounded over 45% from the start of March, thanks to a sturdy first-quarter print helping to regain some investor conviction. With Glu posting tomorrow after the bell, Graham surveys from an encouraged stance, but find this is more of a ‘show-me’ tale, remaining on the sidelines for now on the mobile game maker.

In a neutral, but not negative earnings preview, the analyst maintains a Hold rating on GLUU stock with a price target of $3, which represents a 66% increase from current levels.

The real question for Graham lies in whether the Glu team’s marketing initiatives backing fresh titles will lead to a big “pay off,” a.k.a. another guidance boost.

Graham opines, “Q1 was helped by stabilizing evergreen titles (Kim Kardashian, Cooking Dash, Gordon Ramsay), but was driven mostly by Crowdstar built titles Covet Fashion and Design Home. In fact, DH had the strongest daily bookings of any GLUU title from 2016. While we believe management’s newer strategy of investing more heavily behind fewer titles may be off to a positive start, we remain optimistically cautious on the stock, wanting to see more consistency of executing on top-line growth.”

Keep in mind, Kim Kardashian game rose back in the rankings to last year’s tiers of glory, which along with “[…] a big third year anniversary update […] could lead to outperformance as we conservatively estimate daily bookings to be down y/y,” predicts the analyst.

Looking to progress in management’s mindset, Graham underscores, “Since assuming the CEO role last November, Nick Earl has put in place several initiatives including most notably a smaller game pipeline with more investment behind ‘platform’ games. We have also seen rightsizing of the expense base and a willingness to shift spend from development to marketing behind key titles.”

TipRanks analytics demonstrate GLUU as a Buy. Based on 5 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Glu Mobile stock while 2 maintain a Hold. The 12-month average price target stands at $3.07, marking a 12% upside from where the stock is currently trading.

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