Despite significant competiton,
) continued to solidify its position in the U.S. web-based radio
market in October. Pandora recently announced that listening
hours jumped 18.0% from the year-ago month to 1.47 billion in Oct
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Additionally, Pandora's share of the total U.S. radio listening
market surged to 8.10% compared to 6.60% in the year-ago month
and 7.8% in Sep, 2013.
We believe that the rise in listening hours may have resulted
from Pandora's change of policy related to listening limits. In
September, the company cancelled the listening limits (40 hours
per month) that it had imposed on free users. As a result,
listening hours nearly matched the 1.49 billion listener hours it
had reported in March, prior to the setting up of the ban.
Listening hours also improved from 1.36 billion reported in
Pandora exited the month with almost 70.9 million active
listeners, in comparison to 59.2 million listeners a year ago.
However, the number of active listeners declined over the month
from 72.7 million in Sep, 2013.
We believe that the slowdown resulted from the recent launch of
) iRadio service. As more and more people try iTunes Radio, we
believe that Pandora will lose some market share going forward.
However, we note that Pandora enjoys a first mover advantage in
the music streaming industry. We believe that Pandora's already
popular service, driven by its effective discovery engine and
well established infrastructure places it well to compete against
the likes of Apple, Spotify,
Additionally, Pandora had raised some $400.0 million from stock
offering in September. The company expects to use a portion of
the proceeds for international expansion. The company will also
open new sales offices and compete with radio stations for
attracting local advertising, which is a significant opportunity
Nevertheless, we believe that rising costs related to licensing
and intense competition are the major headwinds in the near term.
Currently, Pandora has a Zacks Rank #3 (Hold).