Victor Anthony Upgrades Pandora To Buy, Take-Out Price Above $20 'Seems Reasonable'

Victor Anthony of Axiom Capital said Pandora Media Inc P is still a takeover target, and a price of above $20 "seems reasonable." Anthony also upgraded the stock to Buy from Neutral, saying that there is a greater probability of "Pandora building a successful and differentiated on-demand service while increasing the value of the core."

Upgrade Justification

"Despite the CEO posturing, we believe Pandora's rich technology, the UI, and the large user base makes it a compelling acquisition even while it is pursuing an on-demand service. A sale could maximize shareholder value quicker," Anthony wrote in a note.

Anthony also set a $16 price target on the stock, implying an upside of 35 percent.

Pandora has more than 79 million monthly active users and close to 4 million paying subscribers to its Pandora one subscription ad-free service.

Related Link: Will Spotify Impact Pandora's On-Demand Offerings?

The analyst believes the profitable core business can expand, particularly through maximizing sponsored listening's ad unit growth by increasing ad loads and local ads, and using programmatic to sell remnant inventory at increased prices.

The Sector

"Users' appetite for paying for music streaming is increasing and Pandora is poised to capture share cost effectively. Moreover, Pandora's multi-pronged model reduces the risk of dependency on the core business to drive shareholder value," Anthony highlighted.

Further, the analyst also noted the positive industry momentum toward Pandora.

"This is important because this likely means that the on-going negotiations with the major labels for an on-demand service have a good chance of success," Anthony added.

According to TipRanks, Anthony has a success rate of 62 percent with an average return per recommendation of +11.3 percent. The analyst is ranked 93 out of 3,990 analysts.

At time of writing, Pandora shares were up 3.73 percent at $12.25.