NEW YORK (TheStreet) -- Pacific Crest said the Pandora Media (P) conference call yesterday to discuss Web IV proceedings regarding royalties with the Copyright Royalty Board (CRB) reinforces its view that "a reasonable outcome is highly likely."
"We continue to believe that the most sound economic arguments and the most comparable deals support performance royalties that are in line with or below Pandora's (P, $20.27, Outperform) current rate structure," analysts said, regarding the internet radio company.
"The company's improving monetization and stable competitive position should allow it to grow ad revenue at a greater than 30% y/y rate for at least the next two years, and we expect operating leverage to increase with scale," analysts noted.
"As long as the CRB process produces reasonable rates, which we view as highly likely, Pandora is likely to grow EPS at a 100% or greater CAGR through at least 2016, which would likely justify a stock price well above current levels," analysts added.
Shares of Pandora are down 0.49% at $20.17.
Separately, TheStreet Ratings team rates PANDORA MEDIA INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PANDORA MEDIA INC (P) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has decreased by 19.1% when compared to the same quarter one year ago, dropping from -$1.70 million to -$2.03 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, PANDORA MEDIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- P's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 36.93%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- PANDORA MEDIA INC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PANDORA MEDIA INC reported poor results of -$0.30 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings ($0.20 versus -$0.30).
- Net operating cash flow has increased to $5.05 million or 22.57% when compared to the same quarter last year. Despite an increase in cash flow, PANDORA MEDIA INC's average is still marginally south of the industry average growth rate of 25.51%.
- You can view the full analysis from the report here: P Ratings Report