One Really Good Reason To Own Pandora Shares: A Possible Acquisition

Aegis Capital’s Victor Anthony believes there could be upside to owning Pandora Media Inc P shares at current levels, given the expectations for a successful launch of the on-demand service and the potential for an acquisition.

Anthony initiated coverage of the company with a Buy rating and price target of $16.

On-Demand Launch

“A beta product of the on-demand service should be launched this month and is being previewed at an event this evening in New York City. A full launch is expected in January 2017,” the analyst mentioned.

Anthony believes the market for paid online streaming is likely to grow rapidly, and Pandora Media would be among the primary beneficiaries following the launch of the on-demand service.

“We see an increasing willingness for users to pay $120 per-year to stream music even amongst millennials,” the analyst stated.

Although competition in this space is intense, Anthony continues to believe there are still millions of potential users yet to sign on for paid streaming, which could help Pandora Media’s on-demand service expand quickly and grab market share.

Potential Acquisition

“Earlier this year the New York Times reported that Pandora had engaged investment bankers to pursue a sale,” the analyst pointed out.

Liberty Media Group LMCA had earlier expressed interest in Pandora Media, making a failed offer for $15 per share. On December 2, Liberty Media was once again reported to have approached Pandora Media’s board regarding an acquisition.

Anthony believes there could be several other companies that might be interested in acquiring Pandora Media, given that the addition of the company could accelerate their online streaming efforts.

At last check, shares of Pandora were up 3.37 percent in Tuesday's pre-market session, seen trading at $13.82.