Pandora Media Inc (P) received a key upgrade from analysts at SunTrust Banks, Inc. (ST). The online radio provider also received a price target increase last week from analysts at Nomura Holdings, Inc. (ADR) (NMR).
SunTrust cited a series of upcoming catalysts, while Nomura focused on the plans to expand its subscription offerings and add on-demand service.
Pandora Media said to be close to deals with record labels
SunTrust analyst Robert Peck upgraded Pandora Media from “Neutral” to “Buy” and set a price target of $18 per share. He noted that the company’s management has been talking about deals with major record labels and that there have been many reports suggesting that they are close to closing deals.
If the reports are true, it would seem that Pandora has been able to do something competitor Spotify has had a difficult time doing because of Apple Music.
Pandora aims to have direct deals with the labels in place by the fourth quarter, which Peck believes is in line with recent reports from The Wall Street Journal, the Financial Times and the New York Post. He added that Pandora Media has deals directly with more than 1,800 indie labels and is now pursuing Universal Music Group, Sony Music and Warner Music Group.
This is important because major labels such as these control 77% of the world’s music sales.
Peck believes Pandora might add more services if it had direct deals in place with at least two of the three major labels, although this isn’t idea.
Amazon.com, Inc. (AMZN) did the same without having a deal with Universal in place.
Pandora May Add New Service
The SunTrust analyst believes one of the new products Pandora Media might add is a $10 per month “‘all you can eat’ interactive service” which would be similar to Spotify Premium, Apple Music and others. He also suggests that a $15 per month family plan and $10 per month “enhanced ad-free radio service” with offline listening, extra skips and other services might be in the offing.
He also sees other new features as being possible, such as the ability to rewind a song in exchange for engaging with a video ad such as a Sponsored Listening ad unit. He believes the company is planning to have new products and features ready by the fourth quarter, although not all the features might launch on the same day.
Pandora Media price target upped by Nomura
Last week Nomura analyst Anthony DiClemente raised his price target for Pandora Media from $13 to $16 per share, citing the media reports that the company is planning to add a $5 per month subscription offering very soon. The option would reportedly expand on the current Pandora One offering. DiClemente believes the rumored offering wouldn’t have any ads and would offer some additional features such as offline listening.
However, he continues to rate the company as Neutral until new products drive improved results.
Shares of Pandora Media rose by as much as 4.41% to $14.22 during regular trading hours on Monday.
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