Analyst Says Don’t Touch Pandora IPO
Just as Pandora raised its IPO price from $10 to $12, one major analyst is telling investors to pass on the stock offering. IPO prices are generally set based on advance investor interest and the newest initial offering would value Pandora at $1.9 billion. But analyst Rich Greenfield of BTIG is encouraging investors to stay way:
“As consumers we love Pandora. It is free, incredibly easy-to-use, works across a growing array of platforms in/out-of-home, and has a de minimis amount of advertising compared to terrestrial radio…Investing in Pandora is a whole different story. While Pandora is creating a large active user base, its reach/frequency continues to pale in comparison to terrestrial radio, as does its profitability….We recommend investors do not participate in the Pandora IPO.”
Greenfield believes that Pandora won’t be able to generate even a modest positive Ebitda until fiscal 2014.
About of Pandora’s revenue for its last fiscal year went to royalty payments. As the Wall Street Journal reminded readers today, "The more people listen to Pandora and the more money Pandora makes, the more those costs will grow, putting pressure on the company to sell a boat load more ads than it does now."
“While Pandora is creating a large active user base, its reach/frequency continues to pale in comparison to terrestrial radio”
Does Greenfield realize that terrestrial radio’s audience is in decline while Pandora’s is growing rapidly?
Pandora has 90m users or something like that with 5 to 10% paying a monthly/yearly premium.
Terrestrial radio will certainly be here in 5 years, while it remains to be seen if internet radio is sustainable. The IPO is chapter 4 in a ending-yet-to-be-written story for Pandora.
I agree that pandora is a bad investment. It has a lot of competitors who I feel offer a much better service (slacker, last.fm, etc)
Terrestrial radio’s ratings are still pretty amazing and revenues are really strong.
So, it’s not true of the declines.
What is true is how the internet is turning into radio. Everything is a giant stream.