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Analyst Cites 'More Questions Than Answers' as Pandora Expands Premium Rollout

Dougherty & Co. maintained a neutral rating on Pandora in a Friday note to investors before the company’s May 8 Q1 earnings report, having “more questions than answers,” analyst Steven Frankel said. “Mounting losses, an uncertain path to profitability and on & off again takeover rumors” pushed Pandora shares down 20 percent year to date amid “chatter” that the company could be seeking a capital infusion from private equity, Frankel said. Dougherty is modeling Q1 at revenue of $317.1 million based on a 10 percent falloff in listening hours to 4.97 billion and a 27 percent uptick in operating expenses to support the rollout of new subscription offerings. Frankel questioned whether Pandora’s subscription products -- Plus and Premium -- can drive a material revenue uplift “without a required marketing spend that bleeds the P&L for an extended period of time.” Pandora has been promoting Premium as a simpler approach to subscription music streaming that builds off subscribers' tastes and listening history, but Frankel questioned what Pandora has to offer that’s superior to or differentiated from Spotify, with its 50 million paid subscribers, or Apple Music, with 20 million paid subscribers. Pandora trickle-launched the $10-per-month Premium on-demand service by invitation only in March but opened the doors this month to a much broader listener segment with access to iOS and Android phones, Google Chromecast, and car integration with Android Auto, Apple CarPlay, GM, Honda, Hyundai, JVC Kenwood, Mazda, Pioneer and Subaru, a company announcement said. The announcement said Premium is available to all listeners, but that doesn’t include desktop PC users. A footnote said Pandora Premium will be available on other platforms, “including desktop and popular connected devices, in the coming months.” Pandora didn’t respond to questions.