Shares of Pandora Media (NYSE:P) gained more than 6.5% in early morning trading Thursday, adding to the company’s strong one-month run that has seen the internet radio stock add more than 16% amid otherwise uncertain times.
Pandora’s latest gains come on the back of a positive report from Raymond James analyst Justin Patterson, who lifted the stock two notches from “market perform” to “strong buy.” Patterson’s double upgrade follows Pandora’s announcement that it would be acquiring ad-tech company AdsWizz.
Patterson said that his “back-of-the-envelope math” concluded that AdsWizz could be worth about $4 a share. The analyst noted that the acquisition gives Pandora exposure to a $28 billion worldwide market for audio advertising.
“A platform shift is underway with smart speakers,” Patterson said in a note. “This creates the need for audio-based ad formats, which Pandora is uniquely positioned for.”
Patterson also slapped an $8 price target on Pandora shares, which would represent a more than 63% upside to Wednesday’s close.
Pandora will pay about $145 million for AdsWizz, with at least 50% of that coming in cash and the rest from some combination of cash and stock. The internet radio pioneer plans to keep AdsWizz’s current platform open, eventually allowing advertisers to access the existing marketplace through Pandora.
“Since I joined Pandora six months ago, I have highlighted adtech as a key area of investment for us,” said new Pandora CEO Roger Lynch. “Today we took an important step to advance that priority and accelerate our product roadmap.”
Pandora’s positive month of trading marks a rare bullish stretch for the battered-down stock. Shares of the music streaming platform have lost more than 55% over the past year as the company has struggled to fend off competition.
Pandora was one of the first ways to stream music online, and its brand of free custom radio stations made the company a household name. However, music streaming quickly adapted; platforms that allowed users to build playlists and pick specific songs and artists, such as Spotify, overtook internet radio.
Interestingly enough, Spotify is set to begin public trading soon. The world’s largest music streaming platform is planning to list on the New York Stock Exchange next month, foregoing a traditional fundraising in favor of a direct offering with no underwriters (also read: Spotify's Road to a $1 Billion IPO).
Another pure-play music streaming stock could cause investors who simply want exposure to this budding market to abandon Pandora in favor of Spotify. Still, the companies differ enough that they should present unique investing opportunities.
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