Pandora Media Inc Stock to Rally Further as Catalysts Take Hold

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Pandora stock - Pandora Media Inc Stock to Rally Further as Catalysts Take Hold

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Pandora Media Inc (NYSE:P) reported better-than-expected first quarter results on Friday. Pandora stock rallied, propelled by the success of its marketing efforts and the increased popularity of its subscription offerings.

The best is yet to come for Pandora, as the company’s new and ongoing initiatives, along with the success of its subscription model, look set to propel its results and Pandora stock much higher.

After Pandora reported its fourth quarter results on Feb. 27, I noted that Pandora’s subscription revenue had surged 65% year-over-year, and I wrote that the company’s “subscription business…is gaining traction against the competition.”

I identified “the proliferation of voice-activated devices and Pandora’s launch of its Premium Access service” as positive catalysts which had caused the jump. And I predicted that the Premium Access product, which enables listeners to try Pandora’s on-demand service in exchange for watching ad videos, would drive accelerated subscription gains for Pandora going forward.

In the first quarter, Pandora’s subscription revenue jumped 63% year-over-year, as the company added 140,000 net new subscribers. Undoubtedly, the continued proliferation of voice-activated devices, primarily Echo from Amazon.com, Inc. (NASDAQ:AMZN), was still contributing to the increase in Pandora’s subscription revenue last quarter.

And on Friday’s conference call, Pandora ‘s CEO, Roger Lynch answered a question about his confidence in the outlook for the company’s subscription business partly by referencing the company’s launch of Premium Access. Lynch’s answer indicates that Premium Access was a key reason for the continued strong growth of the company’s subscription business last quarter.

Investors should continue to be optimistic about Pandora stock. In addition to the positive catalysts I outlined above, the company has several other upcoming initiatives that should propel its results and Pandora stock higher.

More Catalysts Coming for Pandora

First of all, Pandora, backed by the funds it received last year from Sirius XM Holdings Inc (NASDAQ:SIRI), is going to increase its marketing efforts. Those activities should accelerate the growth of the company’s subscription and advertising businesses.

Moreover, Pandora’s acquisition of AdsWizz, which describes itself as providing “an intricate ecosystem that enables digital audio advertising transactions to flow easily between buyers and sellers” should also provide a meaningful boost.

Pandora believes that the deal will enable it to sell more ads because utilizing AdsWizz will enable it to bring many marketers who want to buy ads together on one platform.

There is a precedent which suggests that this prediction will bear fruit. Specifically, the acquisition of ad network DoubleClick by Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is widely considered to have been very successful partly because it “allow(ed) the company to facilitate programmatic ad buying through its very own ad exchange,” as CB Insights put it.

Pandora’s acquisition will also enable the company to effectively sell ads in international markets in which it currently doesn’t have a presence, Pandora CFO Naveen Chopra pointed out.

Finally, Lynch indicated that Pandora plans to integrate talk radio content from SiriusXM’s channels into Pandora’s podcasts. This is in line with my June 2017 prediction that the company “can introduce Sirius’ content…to Pandora.” Podcasts featuring Sirius’ high-quality talk radio content are likely to bring a large new group of listeners and subscribers to Pandora.

Bottom Line on Pandora Stock

Pandora’s Premium Access service and the continued proliferation of voice-activated devices should enable its subscription business to continue to grow very quickly.

Meanwhile, its new marketing initiatives, the acquisition of AdsWizz and the deployment of Sirius’ talk radio content onto Pandora will, in combination, significantly boost Pandora’s subscription and ad businesses, lifting Pandora stock a great deal.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

As of this writing, Larry Ramer owned shares of Pandora stock. 


Article printed from InvestorPlace Media, https://investorplace.com/2018/05/pandora-stock-to-rally-further-as-catalysts-take-hold/.

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