Forbes: Pandora's Success May Have Peaked
December 21, 2011 at 6:17 AM (PT)
Has PANDORA's stock price hit a ceiling at around $10 a share? FORBES seems to think so, In analyzing PANDORA's SEC filings and its burgeoning competition, the business trade predicts harder times ahead for the personalized Net Radio giant.
"We currently forecast PANDORA’s total registered users to reach a figure of 300 million by end of our forecast period, assuming that it expands to certain extent internationally," the magazine projected. "The 300 million figure just in the U.S. is unlikely as it will imply coverage of over 80% of the population by end of our forecast period. Nevertheless, if this registered user base growth slows down and reaches about 200 million by end of our forecast period, it implies a downside of about 40% to our current price estimate.
"In terms of revenues ... if we assume the active users will remain a certain proportion of total registered users, a decline in growth of registered users will imply lesser active users. As a result, this could affect advertising pricing and thus impact growth in advertisement revenue per hour 100 listener hours. Currently we forecast this figure to grow from an estimated $3.50 in 2011 to about $5.40 by end of our forecast period for mobile users. If this figure was to grow to only $4 by end of our forecast period, there could be additional downside of about 20% to our price estimate."
Bottom line: "The above scenarios give us a bear case price estimate of $3.81 for PANDORA. The estimate may be pessimistic, but not unrealistic if competition gets too intense for the company. Our current price estimate for PANDORA stands at $9.48, implying a discount of about 10% to the market price."