Pandora Media Inc (NYSE:P) recently plunged after news of a new streaming radio launch from Apple Inc. (NASDAQ:AAPL) surfaced in the Wall Street Journal. Stock was down as much as 17 percent on Friday. BMO Capital Markets analyzes how this could stir up a new buying opportunity for Pandora’s stock.
The analysis sees Apple Inc. (NASDAQ:AAPL) Radio as a significant competitor, but is of the view that Pandora Media Inc (NYSE:P) still has enough mettle to contest such a launch, and eventually the stock will rise up. If shares are bought right now, investors could have a lucrative opportunity here.
BMO is sticking to its previous forecast for both of these stocks, as WSJ’s report did not put a time frame on when (and if) such a new radio service is launched. It is likely that the new service is not going to commence for the next few months. BMO sees a lot of room for improvement in Pandora’s valuation and maintains its ‘outperform’ rating. The Pandora stock is trading at 3.9 times of BMO’s Enterprise Value/ sales estimate for 2013, and the analyst sees a lot of opportunity for growth. Pandora has consistently done well in the past, and has made a name for itself amid intense competition. The best part about the radio service is how it analyzes millions of files and comes up with the popular and trending songs, a feature that will take time to replicate in other services. The history and records that Pandora has on its listeners is the company’s best asset. Morover the Radio service has an extremely broad base, it works on smartphone operating systems, connected TVs, home audio systems, computers, and is increasingly integrated into cars. Apple Inc. (NASDAQ:AAPL)’s service could very well expand to all such fronts, but Pandora is not a comfy contender, BMO sees a company that will compete and fight back.
The listener statistics for August 2012 observed a 70 percent expansion in total hours streamed, as compared to last year, while the metric was up 3.6 percent from the month of July. Active listeners increased 2.4 percent from July, and expanded by 48 percent on a year ago basis. So BMO says buy Pandora, as of now stock is trading in the range of $9.82-10.82.