Stifel: Web IV A 'Significant Overhang' On Shares Of Pandora Media, Expects Positive Outcome

John Egbert of Stifel assumed coverage of Pandora Media Inc (NYSE: P) from colleague Scott Devitt and placed a Buy rating and $29 price target on shares.

According to Egbert, Web IV has been a “significant overhang” on the stock since proposals were submitted in October. The analyst adds that he is becoming “increasingly optimistic” on its income relating to Pandora's potential royalty rates for the 2016 to 2020 period.

Egbert notes that all three judges on the Copyright Royalty Board are overseeing their first webcaster proceeding and the analyst thinks the judges are leaning towards a more sustainable statutory license for the five-year period.

“We are comfortable with the approach Pandora took in its initial testimony,” Egbert argued in his note. “Although many webcaster peers sought a full rate reset, Pandora took a more conservative approach by proposing rates slightly below current levels based on its direct deal with MERLIN rather than taking a chance with a riskier proposal.”

Egbert concludes that Pandora's “big picture view” is unchanged given its market leading position with nearly 80 percent share of Internet radio listening while its advertising business is showing steady progress.

Bottom line, the overhang on the Web IV proceeding creates a “compelling buying opportunity” in 2015 ahead of the December CRB ruling as shares should remain supported by a roughly $3 billion strategic value in the mid-teens dollars.