Citi analyst Mark Kelley initiated coverage of small-to-midsize internet names, saying he favors the ones with a strong presence in mobile and with large and consistently engaged audiences. In the online media group, the analyst sees Pandora (P) as the best positioned in mobile, which he believes will be the major driver of growth.

BEST IN MOBILE: Citi's Kelley started Pandora with a Buy rating and $16 price target as he sees it as one of the "best positioned names" in mobile with an on-demand offering expected by the end of 2016. The company is also "well positioned" to benefit from ad-based competition subsiding, the analyst told investors in a research note. Kelley views the addition of Pandora's on-demand offering as incremental to topline estimates, and therefore margins, in 2017.

NEWS: Adweek reported on April 7 that Simon Fleming-Wood is stepping down as Pandora's Chief Marketing Officer, which comes after the recent announcement that the company's founder Tim Westergren is stepping back in as CEO and Sara Clemens is taking over as COO.

AUDIENCE OVER ADS: While Citi's Kelley is positive on the online media group, he is cautious on the ad tech space. The analyst said he expects online advertising growth of more than 13%, with mobile driving the majority of growth, and added that he favors names with a strong presence in mobile and with large and consistently engaged audiences. Pandora, Everyday Health (EVDY) and WebMD (WBMD) all meet these criteria, with the last two having "very unique" audiences, which enables hyper-targeting for pharma and healthcare advertisers, Kelley told investors. While the analyst sees ad tech as necessary, he believes the current take rate environment is "unsustainable," with too many companies chasing the 30% growth in programmatic advertising. Within the group, however, Kelley views two main standouts, Rubicon Project(RUBI) - Get Report , which is the analyst's Top Pick, and Criteo(CRTO) - Get Report . Additionally, Kelley is positive on TubeMogul (TUBE) , but said sell Rocket Fuel (FUEL) .

PRICE ACTION: Right after the opening bell, Pandora's shares rose as high as $8.54, but they have given up those early gains and are flat near $8.18 per share at time of writing.

Reporting by Jessica de Sa-Mota.

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