Pandora Climbs After Suntrust’s Peck Upgrades To Buy

The shares of Pandora (P) are rising after an influential analyst at research firm SunTrust upgraded the stock to Buy from Neutral. The company has a number of upcoming potential catalysts, including direct deals with music labels and new tiered products, according to the analyst.

MUSIC DEALS, NEW PRODUCTS: There is a 75% probability that Pandora will sign direct deals with music labels by the first quarter of next year, wrote SunTrust analyst Robert Peck. The direct deals will enable the company to launch new products and services, including a $10 per month, “all you can eat” interactive service, Peck believes. The company could also create an ad-free service with new features like offline listening and additional song skips for under $10 per month, the analyst stated.

RESULTS OUTLOOK: The new features could raise Pandora’s subscriber base by 4M per year and trigger a top-line gain of about 15%, leading to an increase in its contribution profit by 4%-9%, Peck estimates.

OTHER CATALYSTS: Pandora will probably launch new products overseas in 2018 and beyond, and it’s “very possible” that the company will be acquired, Peck stated. Activist shareholder Corvex Management has already pushed Pandora to sell itself, and, according to published reports, Liberty Media (LMCA) has offered to buy Pandora for $15 per share, setting a floor on the company’s value, the analyst stated. He raised his price target on Pandora to $18 from $12.

PRICE ACTION: In late morning trading, Pandora rose 4.5% to $14.25.