Wells Fargo adjusts estimates for Pandora Media Inc (NYSE:P) following CRB rates review


The recent royalty rates review by the Copyright Royalty Board (CRB) will come as a near-term penalty but long-term boon for Pandora Media Inc (NYSE:P), according to Wells Fargo. The new rates will affect music content licensing agreements for the five-year period between 2016 and 2020.

Adjusted estimates

Based on the CRB outcome, Wells Fargo has also adjusted its estimates for Pandora.

For fiscal 2015, the firm has sweetened its targets for Media Inc (NYSE:P) as it now expects revenue, EBITDA and EPS of $1.18 billion, $65.1 million and $0.17, respectively. Its previous target for the year was revenue, EBITDA and EPS of $1.16 billion, $57.2 million and $0.15, respectively.

However, for fiscal 2016, Wells Fargo expects Pandora to take a serious bottom-line hit because of the recent royalty rates review. The firm expects 2016 revenue of $1.47 billion, EBITDA loss of $2.2 million and and EPS loss of $0.18. It previously estimated revenue of $1.37 billion, EBITDA of $78.8 million and EPS of $0.11 for the year before the CRB decided on the new rates for 2016-2020.

Price target

Despite the step-down in 2016 performance estimates, Wells Fargo has sweetened its price target for Media Inc (NYSE:P). The firm now has a 12-month price target range of $15-$17 on Internet radio stock, up from $14-$16 range in the previous estimate. However, Wells Fargo maintains Market Perform rating on the stock.

Short-term pressure, long-term boon

According to Wells Fargo, CRB is favorable for Pandora in the long-term. Part of the reason for that is that the CRB panel settled on rates that were 30% below what SoundExchange proposed. That means that Pandora will not face much pressure on the long-term as was previously feared. However, for the near-term, Pandora will face royalty burden in 2016 that is nearly 15% heavier than what it is expected to shoulder in 2015.


Wells Fargo also views Media Inc (NYSE:P)’s acquisition of TicketFly is favorably.

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