In a research report issued Friday, Canaccord analyst Michael Graham reiterated a Buy rating on shares of music streaming giant Pandora Media Inc (NYSE:P), and lowered the price target to $15.00 (from $18.00), after the company announced a $480 million investment from SiriusXM, the sale of Ticketfly, and reaffirmed guidance.
Graham commented, “We believe this [SiriusXM investment] is a positive step for Pandora and should clear up some of the drama and negative sentiment surrounding P stock. In particular, the stock should move from being an arbitrage situation to more of an operating story in the short term. That said, while this transaction answers several important questions, it may raise some new ones that might persist for a while. In any case, however, we continue to think Pandora stock is undervalued and believe these moves and solid fundamental performance for the next few quarters should help the stock rebound.”
“We are taking an initial pass at removing Ticketfly from our model beginning in Q4 and reflecting dilution from the Sirius investment. This leads to no change in Q2 and Q3 estimates, with revenue impact and more modest EBITDA impact from Ticketfly in the longer term. Our price target is based on 2021 EPS, which goes from $1.19 to $1.00, reflecting Ticketfly and Sirius dilution. Our price target goes from $18 to $15, based on 25x our $1.00 2021 EPS estimate discounted at 12%,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Graham has a yearly average return of 12.2% and a 60% success rate. Graham has a 3.9% average return when recommending P, and is ranked #175 out of 4572 analysts.
Out of the 29 analysts polled by TipRanks (in the past 12 months), 14 rate Pandora Media Inc stock a Buy, 13 rate the stock a Hold and 2 recommend Sell. With a return potential of 58%, the stock’s consensus target price stands at $13.93.