Richard Tullo, an analyst at Albert Fried, has a solid track record on Pandora ( P). With a little variation, it pretty much mirrors mine. Bullish when everybody else was bearish, which means we rode the move from the teens into the $30s. And then, as "everybody" jumped on the bandwagon around $35-$40, we hopped off as the stock dove into the low-to-mid $20s.
Tullo is out with a research note this morning, where he reiterates his $20 price target for P, and reacts to the news that Google ( GOOG) bought Songza. I agree with everything Rich says here, particularly the first bullet point that recent upside in Pandora stock results from takeover speculation:
- Last week wrote a note that suggested that Pandora was trading at a premium to a takeover and our modeling has been validated in our view.
- Last night Songza was purchased by Google.
- As Goldman Banker Anthony Noto is now the Twitter (TWTR) CFO we think Twitter buys Spotify as the Companies have relationships with Noto and Goldman Sachs. Alternatively TWTR has had discussions with Sound Cloud.
- We also note that Pandora's scale is false asset as Apple and Beats or Songza and Google can install the music service app on new devices or operating systems updates. This means that the next time Google updates Andriod OS it can roll out Songza to maybe as many as a billion devices globally and 100's of millions of devices in the US. Pandora is a tough competitor but we think these strategies are new and can change the competitive dynamic.
I don't usually regurgitate what analysts say. Like you, I don't trust most of them as far as I could throw them. However, Tullo knows his stuff, particularly on Pandora.
Of course, Pandora executives will blow all of this off as poppycock because nothing that happens around Pandora means anything to Pandora.