Pandora Media: Color on Quarter (8.95)
- RBC Capital Mkts lowers their P tgt to $10 from $15. Pandora posted a mixed Q2 with better than expected Revenue & EBITDA but weaker Key Metrics (Listeners, Hours, Paid Subs). Pandora lower its FY17 Revenue guide to reflect Ticketfly sale, closing of NZ/Australia ops, and a de-emphasis of Subscription revenue. Firm sees P in midst of a major product, mgmt, and strategy transition.
- Stifel tgt cut to $12 to reflect a more modest near-term growth outlook, but maintain our Buy rating on Pandora shares. notes Pandora topped 2Q revenue / profitability forecasts but lowered the top end of its full-year revenue outlook as the co is taking a more measured approach to promoting its subscription products after rethinking its marketing strategy. Pandora confirmed the closure of its ad-supported businesses in Australia and New Zealand as the company tightens its focus on the valuable U.S. market. Pandora expects trends in its advertising business to improve in 2H:17, coinciding with its launch of (arguably long overdue) programmatic video/audio buying capabilities in 3Q/4Q.
- FBR & Co notes Pandora is a transitional company. To that end, the 2Q17 transition was encouraging. Advertising, the new focus, delivered healthy upside. That offsets less subscription than we had assumed, as subscription is being de-emphasized.
- Dougherty notes the strategic investment from SiriusXM (SIRI, Unrated) has led to a wholesale housecleaning of the mgmt team and likely shift in strategic direction away from On Demand and back toward the legacy Ad-supported business. It that vein, Q2 benefitted from 24% Y/Y growth in Ad RPM, which drove a revenue beat. However, the path to sustainable profitability remains clouded and until a new CEO is put in place and the strategy clarified they are going to remain on the sidelines.
- Needham notes P reported 2Q17 revenue of $377mm, 8% above our estimate, and an Adjusted EPS loss of $0.21, much better than our Adjusted EPS loss projection of $0.31. However, it was a noisy quarter that included a $155mm write-off of goodwill and termination costs owing to of the closing of P's only 2 international markets (Australia and New Zealand) and the sale of Ticketfly. P's strategy pivots have proven very expensive for P shareholders. In 2Q17 Sirius XM purchased $480mm of Series A preferred stock, convertible into P's common shares at $10.50/share. The initial closing was for $158.6mm on June 9th, with the balance set to close in 4Q17, after regulatory approval. P sold Ticketfly to Eventbrite for $200mm ($150mm in cash plus a $50mm convertible note), that should close this month.
- Canaccord Genuity tgt to $14 form $15; BAML tgt to $7.50