Pandora underwriters weigh in on stock price

SAN FRANCISCO (MarketWatch) — numerous analysts with brokerages that underwrote the IPO of Pandora Media Inc. on Monday initiated their coverage of the streaming-music company with high marks for its growth opportunities, but one told Pandora’s shares already are at their full valuation

Ralph Schackart of William Blair, Doug Anmuth from JP. Morgan and Mark Mahaney of Citigroup all set ratings of either outperform or buy on Pandora’s P
-122%. stock. Anmuth
also set a target of $22 a share,while Mahaney’s target is at $25 a share

Pandora held its initial public offering on June 15, debuting at $16 a share and rising as much as 45% during the first day of trading. The stock rose 22 cents to $1825. Monday.

The analysts all cited Pandora’s commanding presence in the online-radio market, even as it accounts for just a sliver of the total share of US. radio-listening hours, among the reasons for their opinions on the stock.

Anmuth of JP. Morgan told Pandora has around 60% of the US. Internet-radio listening hours, but so far, only around 4% of the countries total market for radio-listening time. One of the keys for Pandora, he added, is growth on mobile devices, in tandem with the development of the mobile-ad market.

“There is significant opportunity for Pandora to improve the monetization of its listener hours,” Anmuth wrote in a research note. “Mobile advertising is at a very early stage of development, [and] Pandora’s monetization of an hour of mobile listening is substantially below the level of monetization is realizes from the Web”

Citigroup’s Mahaney told he doesn’t expect Pandora to start turning a profit until 2014, but maintains his $25-a-share target is reasonable based on analysis of factors, such as the company’s discounted cash flow and long-term growth rates.

While the majority of brokers believe Pandora’s stock has some room to grow, Stifel Nicolaus analyst Jordan Rohan set a neutral rating and pegged his price target at $18 a share.

Rohan told Pandora’s content costs, which create up 57% of revenue, are rising, along with increased usage of Pandora’s services. Investors “appear already to be assuming a ramp[-up] in revenue and margins beyond current forecasts,” he pointed out


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