MKM Says Pandora Could Be Worth $115/Share In 5 Years

Shares of Pandora (NYSE: P) are shooting higher after bullish comments from MKM Partners, who have a Buy rating and $35 price target (20.6 percent upside) on the stock.

RPM (advertising revenue per 1000 pages) could more than triple by 2020 to $125, according to analyst Rob Sanderson. One of the key drivers of this growth is an increase in local advertising, which is far more lucrative than the national campaigns Pandora had focused on in the past.

Related: Morgan Stanley Initiates Coverage on Best Buy, Says Pricing Has Never Been More Competitive with Amazon

Regarding competition, Sanderson claims that, “P’s prime competitor is clearly FM-radio, not Apple, Spotify, Google or any other Internet service.”

The $35 price target is based on 12.7 percent annual growth in listener hours at $125 RPM. Because these assumptions are very far reaching, MKM applies a 35 percent discount. However, Sanderson claims the stock could be worth up to $115 in 2019 at 20 times forward earnings.

Pandora shares are trading at $29.25 in Tuesday's session, up 3.7 percent.