Goldman Sachs (GS) Just Raised Its Target Price on Pandora (P)

Goldman Sachs analyst, Heath P. Terry, just raised his price target on Pandora to $19 from $17. he also upgraded the stock from “buy” to “conviction buy.”

Terry released the following statement: “While the company faces meaningful execution and competitive risks as it launches new subscription models and transitions its ad-supported business to direct label relationships, we see significant potential upside to out-year estimates from premium radio and on-demand subscriptions. With the current valuation at 2.1X 2017E sales, having underperformed the median SMid-cap internet company by 35ppt over the last 12 months, the potential upside more than offsets those risks. Therefore, we are Buy rated (CL) and raise our 12-month price target to $19 from $17 to reflect that optionality.”
He also said, ” “While we did not look favorably on abandoning the favorable CRB results of Dec ’15, we do believe that Pandora’s new product offerings could significantly expand its addressable market. The mid-priced premium radio product, particularly with the addition of offline listening, along with a differentiated on demand product that leverages Pandora’s data, technology, and audience, should not only reach an audience Pandora historically hasn’t but also an audience its competitors haven’t. With 10% of US radio listener hours and the potential to see that accelerate with the growing ubiquity of connected cars and devices, we believe Pandora’s existing 5% share of the $17bn ad-supported radio market should expand. We also see the synergies in tickets as potentially going beyond the company’s $300mn estimate for 2020.”

Disclaimer: We have no position in Goldman Sachs Group Inc. (NYSE: GS) nor Pandora Media Inc (NYSE: P) and have not been compensated for this article.