Pandora Media Inc (ticker: P) got a much-needed cash infusion over the weekend, but it wasn’t the big buyout news that investors had been seeking. Pandora investors may not be getting the quick payoff they wanted, but the company is now free to aggressively invest in its core advertising business.
On Friday afternoon, Pandora announced it will be receiving a $480 million investment from Sirius XM Holdings (SIRI) and will be selling its Ticketfly business to Eventbrite for $200 million.
Sirius XM CEO Jim Meyer is confident that the relationship between Sirius and Pandora will bear fruit for investors in time, but the market appears skeptical.
“We believe there are future opportunities to accelerate Pandora’s growth and further increase stockholder value,” Meyer said.
Pandora stock sold off by more than 5 percent on Monday in response to news of the deals.
Oppenheimer analyst Jason Helfstein says the Sirius investment “obviously ends any takeout speculation” and downgraded Pandora stock from “outperform” to “perform.”
While Pandora faces a tough road ahead, the company is on the right track by pursuing its advertising business rather than attempting to monetize its large subscriber base by transitioning to a premium subscription model, Helfstein says. Pandora should also focus more on disrupting the existing terrestrial radio market rather than going toe-to-toe with online streaming radio heavy-hitters Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOG, GOOGL) and Spotify, Helfstein adds.
“We believe that management’s strategy of refocusing on the core advertising business is correct given the competitive environment in the premium subscription market and the fact that the digital audio advertising format is currently undermonetized,” Helfstein says. “While we believe in the strategy, we think there will be a transition period as new operating managers are brought into the company and Pandora develops audio advertising technology to improve its monetization.”
Pandora investors could also benefit from the company recruiting better management, he says, citing payment-processing problems, missteps in marketing premium services and bugs with the technology supporting the company’s premium service.
Pandora endured…
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