Pandora Stock Gains on The Back of Bullish Sentiment
Pandora Media Inc (NYSE:P) stock closed the last session at $14.67, posting a gain of 3.6%. The stock had earlier shown some good movement on the back of the company’s new service launch last month.
What is driving the recent gains?
Pandora stock rallied on the back of an analyst upgrade on Tuesday. Goldman Sachs Group Inc (NYSE:GS) upgraded Pandora stock to a “conviction buy” from a “buy” rating. Analyst Heath Terry raised his price target to $19.00 from $17.00. Although there were substantial risks to the online radio company, he said there is significant potential upside in premium radio and on-demand subscriptions. (Source: “Pandora to rally 34%, Goldman Sachs says,” CNBC, October 4, 2016.)
Pandora stock had made impressive gains last month when it signed direct licensing deals with Warner Music Group Corp., Sony Music (ADR) (NYSE:SNE), Universal Music Group, Inc, and the Merlin Network. The company had also launched a new subscription service, “Pandora Plus” and planned to add more features to its existing services. Plans are underway to introduce its on-demand subscription service later this year at the price of $10.00 per month. This is the reason for the current optimism surrounding Pandora stock. As the company introduces new products, the market for the company expands.
Pandora stock has recovered from its September lows of $13.31, and is up about 10% from that level. However, it is still not close to its initial public offering (IPO) price of $16.00. Pandora stock has had quite a roller coaster ride since its listing in 2011. P stock has lost about 32% over the last one year, as compared to the S&P 500, which gained about 13% in the same time period. Over five years, Pandora stock has returned about three percent, in contrast with the 16% gains from the S&P 500.
Chart courtesy of Stockcharts.com
Pandora Media has struggled with its growth over the past few years. The threat from competition, most notably, Apple Inc.’s (NASDAQ:AAPL) “Apple Music” and Spotify, has always weighed on Pandora stock. However, the sentiment seems to be improving at the moment, and expectations are that Pandora will be able to compete with its bigger rivals and gain more subscribers.
The new deals shall definitely help Pandora Media improve the size of its catalog. However, investors shall be looking forward to the quarterly results for further clues to the growth of the company’s products. If management can convince the market that it can become a strong player in the on-demand music segment, Pandora stock is likely to soar.