Pandora Shares Fall on Ratings Cut

An analyst says the company's rising sales costs will hurt profits

   

Pandora Shares Fall on Ratings Cut

Shares of Pandora (NYSE:P), the Internet radio service, slipped about 3% in Monday mid-day after the company was downgraded by a Wall Street analyst.

Scott Devitt at Morgan Stanley (NYSE:MS) reduced his rating for Pandora from “Overweight” to “Equal Weight,” citing the impact of rising costs on profits as the company expands its sales teams, Forbes noted.

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Pandora is looking to increase its ad sales from local radio streams. Devitt acknowledges that the effort will produce increased revenue in the long-term, but says that the short-term costs of building the sales infrastructure will dent profits.

Devitt projects a loss before earnings, taxes and charges of about $11 million for Pandora in fiscal 2013, followed by a $9 million loss in fiscal 2014, which is considerably worse than other analysts’ estimates.

The company’s shares were trading under $10 after news of the downgrade broke. Devitt says his price target for Pandora is $12 a share.


Article printed from InvestorPlace Media, http://investorplace.com/2012/08/pandora-shares-fall-on-ratings-cut/.

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