Analyst Holds Pandora Rating After Shakeup, but Stock Takes a Beating

Wall Street met news of management changes at Pandora with a 12 percent cut in stock value Monday, but analyst firm Dougherty & Co. maintained an outperform rating on the No. 1 music streaming company. Pandora replaced CEO Brian McAndrews Monday with co-founder Tim Westergren while Chief Financial Officer Mike Herring added the president title and Chief Strategy Officer Sara Clemens was tapped as chief operating officer. “We continue to think that Pandora's long-term strategy will drive profitability,” Dougherty analyst Steven Frankel said in a research note. Frankel compared Pandora’s strategy to invest in on-demand subscription service, live events and international expansion to that of Netflix with one exception: “Netflix has little control over its content costs, and Pandora has relatively well-settled pricing for its content.” New Copyright Royalty Board rates “set a benchmark” for negotiating international and on-demand content rights, while Pandora's three-tier offering (commercial-supported and commercial-free Internet radio plus on-demand listening) gives it “a competitive advantage over virtually every other service,” Frankel said. It could take a year or more for the strategy to show results, he said. Shares closed at $9.60 Monday.