Pandora Shares Surge on Positive Market Research Report

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The Pandora Media Inc. logo shown on an iPhone in 2013. 

A new market research report claims advertisers expect to buy more advertisements on Pandora.

Pandora shares closed up 10.4 percent to $17.57 after an OTR Global report said 17 advertising agencies expected to increase their advertising spending at Pandora.

The new OTR Global report says advertising agencies are happy with their Pandora ads' effectiveness and expect to increase their spending, according to reports. Additionally, OTR Global says Pandora's local advertising revenue last quarter increased about 90 percent compared to the prior-year period. Pandora will report fourth-quarter earnings on Feb. 5.

Friday's (Jan. 23) spike provided rare good news for Pandora investors. The stock is far off its 52-week high of $40.44. A confluence of factors appears to have worried the market: increased competition from the likes of iTunes Radio and Spotify; stalled growth in monthly listeners; and some concern the Copyright Royalty Board will increase royalty rates for webcasters, for the years 2016 to 2020, in a rate proceeding that concludes in December.

Investors have had a few good news items of late, however. Last month eMarketer showed some results of an RBC Capital Markets survey (conducted in November) that showed the percent of people surveyed that listen to Pandora jumped from 51 percent from 27 percent a year earlier. The only other service or format to make a significant gain was Spotify, which jumped to 14 percent from six percent.

Another bit of good news was a recent report from a Stifel analyst who expects Pandora will not be harmed by the rates the Copyright Royalty Board will set later this year and the present share price provides a buying opportunity. SoundExchange, which represents record labels and artists in the rate proceeding, has proposed a significant rate increase, but the analyst believes there is only a five percent chance of that outcome.


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