Tags: pandora | stock

Pandora Shares Gain on Projected User, Ad Growth

Monday, 19 Mar 2012 04:22 PM

Shares of Pandora Media Inc., the Internet radio pioneer, gained Monday on new coverage highlighting the music site’s potential to add listeners and capture advertising dollars.

Pandora, based in Oakland, California, rose 2.7 percent to $10.60 at 3:47 p.m. in New York, after climbing as much as 4.7 percent earlier. Investors purchased calls, bets the stock will rise from current levels, at 6.5 times the rate of puts.

Monday’s gain lifts Pandora off of an 11-week low hit March 16 in the wake of fiscal first-quarter results that missed analysts’ projections on March 6. John Blackledge, an analyst with Credit Suisse Group AG in New York, initiated coverage today with a neutral rating and $12 target price, suggesting the company will build subscribers and revenue as it sells ads.

“We expect continued usage growth and improving monetization to yield strong top-line growth,” offset by high content costs, Blackledge wrote in his note to clients. “We believe usage trends and revenue growth are factored in at current levels.”

Pandora has about 70 percent of the Internet radio market in the U.S., according to Triton Digital, with more than 125 million registered users and more than 49 million active users. That’s up from 24 million last year, according to the Credit Suisse note.

Demand for Calls

Blackledge expects Pandora to increase its share of the ad- supported music market to 7.7 percent by 2016, from 1.45 percent in 2011, he wrote. Content costs will rise to 54 percent of revenue this year and 60 percent in 2013, from 50 percent in 2011, he wrote, citing “explosive growth in listening hours.”

More than 8,100 calls to buy Pandora’s stock changed hands as of 3:42 p.m. in New York, 1.4 times the four-week average and 6.5 times the number of puts to sell. April $11 and $12 calls were the most active.

While more than 70 percent of Pandora’s listening is via mobile devices, only about 50 percent of its advertising revenue is mobile. The remainder comes from PC-based online listening, according to Blackledge.

The company is hiring staff to increase its sales presence in large U.S. radio markets.

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Monday, 19 Mar 2012 04:22 PM
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