This Analyst Pans Pandora As A Poor Buy

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Last week was a fantastic one for Pandora Media stock, thanks to a still-unconfirmed CNBC report that the streaming audio service provider is now reconsidering a merger acquisition with Sirius XM?


Does that make Pandora a smart buy? Don’t bet on it, says an analyst with The Street.

According to Shubhankar Adhikari, a business writer and editor with six years of experience in covering key business issues, emerging market trends, and investment analysis, “Pandora Media needs to do more than reiterate its ambitious growth targets and subscription initiatives.”

In a rather unkind review of “P” shares, Adhikari noted that Pandora is losing both money and subscribers, pointing out that in 2015 Pandora Media’s losses increased “more than five-fold from 2014.”

He also found it disconcerting that Pandora has had negative operating cash flow over the past four quarters.

Ahead of the Opening Bell on Wall Street today (12/12), Pandora shares are trading at $13.81. As Adhikari points out, the consensus estimates of 26 analysts tracked by The Street is $14. Pandora’s market cap is $3.22 billion. “It wouldn’t be prudent for investors to buy Pandora Media at its price-sales ratio of 2.4 times unless one they think it will be bought at a significant premium,” he concluded.
Pandora’s PR machine went into overdrive Dec. 8 as it formally unveiled its forthcoming Pandora Premium $10-a-month subscription service to analyst and media. Although company sources told RBR + TVBR in August that a deployment would be seen by the end of 2016, Pandora is launching it at a still-to-be-determined date in 2017.

As Zacks Equity Research notes, analysts have observed that Pandora’s soon-to-launch service “doesn’t offer something radically different from what is already available in the market. They argue that Pandora’s entry has been pretty late in the on-demand music services arena, which boasts big names like Spotify and Apple.”

Add iHeartRadio to that group of companies. Two new subscription-based services – iHeartRadio Plus and iHeart All Access – will bow in January. The company made the announcement on Sept. 23, essentially trumping Pandora by entering the subscription-based on-demand audio streaming services business, and by providing a definitive launch date for its two forthcoming products.
“Pandora, though a big name in the online radio market, is still a ‘no-profit’ organization,” Zacks laments. “Escalating costs related to licensing, footprint expansion and operating expenses continue to be a drag on profitability.”

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Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.