The firm reduced its price target to $9 from $14 on shares of the Oakland, CA-based online radio service, according to TheFly.
Pandora will have trouble meeting its ad revenue target of $4 billion by 2020, BofA/Merrill Lynch noted.
BofA/Merrill Lynch believes that if the company adds more advertisements, it will see a decrease in the number of total hours users spend listening to a radio station.
But in order to reach its ad revenue goals, Pandora must increase listening hour and active user growth, the firm added.
Pandora also faces steep competition from similar services offered by Spotify, Apple (AAPL), Alphabet's (GOOGL) Google unit and others, the firm said.
"Even with Pandora differentiating on auto playlist creation, we think it will be hard for Pandora to attract 10-15 (million) paying subs," BofA/Merrill Lynch said in an analyst note, according to CNBC.
About 7.14 million shares of Pandora have been traded so far today, above the company's average trading volume of roughly 5.07 million shares per day.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
The team rates Pandora as a Sell with a ratings score of D. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: P