Pandora Could Benefit From A Weakening Economy

Albert Fried’s Rich Tullo reiterated an Overweight rating for Pandora Media Inc (NYSE: P), with a price target of $16. He said that Pandora offered revenue growth potential and that volatility in its shares could provide better entry points.

Analyst Rich Tullo pointed out that a weakening of the economy would put a free service at an advantage over subscription services.

Pandora Versus Other Players

“Since Pandora reported results two music platforms appear to be on the verge of closing while one platform outside of Pandora appears to investing for the future,” Tullo wrote.

Pandora has plans to expand Pandora One and launch an international Streaming Service. The company’s free ad supported business model appears to be “durable,” while few media brands have been able to “successfully execute on subscription revenue mostly models,” the analyst mentioned.

Tidal, a music subscription platform, was recently sued by an artist for failing to pay royalties. There are reports of Samsung’s Milk closing. “We think easing competition benefits legacy operators,” the Albert Fried report stated.

“Pandora has a better cost containment than its peers - owing to the new CRB rate,” Tullo noted, while adding the Pandora is likely to capture about 30-40% market share over time, in the IP radio industry which could be worth $7-$10 billion by 2020.