Pandora Analyst Asks: What's Different Now?

In a report published Monday, Needham analyst Laura Martin commented on Pandora Media Inc.'s P Analyst Day that detailed three new strategies that could result in upside valuation if they are well executed.

Martin noted that the strategies focus on international expansion, closer relationships with artists and music labels, and a drive towards better profitability metrics.

Martin further added several key valuation drivers from the company's Analyst Day presentation.

• 1. Pandora articulated that a key strategic focus over the next five years is to further expand internationally. However, the strategy likely cannot be executed before the CRB decision in the U.S. is final in the fourth quarter 2015.
• 2. Pandora works well alone but has not historically worked well to create economic upside for others in the music system. The company's new CEO Brian McAndrews appears to be bring a "more collaborative philosophy" and spending money to make the company more responsible for its role in the music ecosystem.
• 3. Pandora implied that faster EBITDA and earnings per share growth will be a "higher priority" than it has been in the past.
• 4. Perhaps the biggest upside surprise was the depth of the company's management team who were "impressive, although no doubt expensive."
• 5. Positive valuation drivers include higher U.S. listener targets of 100 million, up from 80 million in the fourth quarter 2014, and 30 hours per month per listener, up from 22 hours.

Shares remain Buy rated with a $20 price target.