Analyst Maintains Neutral Rating on Pandora as It Awaits Effects of SiriusXM Investment

Pandora’s "path to sustainable profitability remains clouded,” Dougherty & Co. analyst Steven Frankel wrote investors before Pandora’s Q3 earnings call. The 20 percent strategic investment from SiriusXM led to a “wholesale housecleaning” of management, a strategic shift away from the premium on-demand offering and a renewed focus on the legacy ad-supported business, Frankel wrote, maintaining a neutral rating “until we have a better feel for what sustainable growth and profitability looks like.” Dougherty is projecting Q3 revenue of $379.9 million, with 4.97 billion listening hours. The analyst is projecting quarterly ad revenue of $298.5 million and subscription revenue of $81.4 million. Frankel listed questions for the company as it moves forward: what tactics Pandora will use to re-engage listeners and drive up listener hours for the ad-supported business; how the company will bring in new users; whether new, nontraditional content -- This American Life and Serial -- are finding an audience; how voice-controlled smart speakers will play into Pandora's future and if they require a different advertising model; and whether Pandora will have to renegotiate deals with labels after the "slower-than-anticipated ramp of its subscription business.”