Peck Reduces Pandora Revenue/EBITDA Estimates, Mentions Limited Visibility And Slowing Core

SunTrust Robinson Humphrey on Friday issued a report on Pandora Media Inc (NYSE: P) after the company reported Q4 earnings. The firm maintained its Neutral rating while lowering their price target from $15 to $12.

Analyst Robert Peck and Matthew Thornton wrote, "Pandora's 4Q results were largely in line with expectations. 2016 top line guidance was also in line; however, the materially lowered EBITDA outlook largely reflects higher content costs and upfront investment in new initiatives... Pandora may be looking to sell itself; while management stated it is running the business to the long term plan which it outlined, we think there could be several interested potential acquirers."

Analysts at SunTrust believe that two key factors can drive Pandora's stock higher.

1. Top line growth

Pandora reported revenue of $336 million in the Q4 that reflected strong demand for advertising spots on its platform. SunTrust noted that Pandora's management believes that the company can reach $4 billion in revenue by 2020 as it creates new initiatives to drive user growth and expand its content library.

2: Acquisition

Analysts at SunTrust noted that Pandora is a good acquisition target due to its depressed valuations and sizable user base. If Pandora is bought that would most likely be at a premium to its current price, bringing value to existing shareholders.

Shares of Pandora recently traded at $7.39, down 18.7 percent.