Pandora shares rise on buyout buzz
Apple's Internet radio ambitions put the Internet radio company in play.
Pandora, which went public last year, would interest many companies because it has helped breathe new life into the radio business.
During the last quarter, the Oakland, Calif., company said revenue surged 51% to $101.3 million as total listener hours climbed by 80% to 3.3 billion. Its net loss was $5.4 million, or 3 cents a share. Wall Street analysts expect Pandora to earn 1 cent in the current quarter. Though consistent profitability will be elusive for a while, Pandora seems to be headed in the right direction.
Pandora, which claims 150 million members, would be of interest to a plethora of companies, including Amazon (AMZN) and Google (GOOG), according to Bloomberg. Private-equity players are potential buyers as well. One reason for their interest is Pandora's growth in mobile, where revenue surged 86% to $59.2 million in the last quarter. That growth shows little sign of slowing. Like many people, I listen to my Pandora stations on my iPhone during my workouts. Many people probably listen to Pandora at work, as well, over their mobile devices.
Shares of Pandora are up about 7% this year as its earnings surpassed even the most optimistic forecasts. The company is lobbying Congress to lower its licensing rates, which it argues are far higher than those of rivals such as Sirius XM Radio (SIRI). Wall Street is betting that Pandora can favorably resolve this issue. The average 52-week price target on the stock is $13.83, about 28% above where it currently trades.
Of course, Apple, which already dominates the digital music business, would be a formidable competitor. The New York Times recently reported that Apple's service would enable users to customize their music streams to suit their tastes. The role of advertising in this service isn't clear. Apple is in talks with music labels to license content. The recent launch of the iPhone 5 probably will give these discussions a heightened sense of urgency because it would make a good selling point ahead of the holiday season.
The question isn't whether Pandora will get snapped up by a larger rival but when.
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