Canaccord Genuity is out with an interesting research report on the controversial stock of Pandora Media Inc. (NYSE: P). While the firm noted that the earnings season has not been kind to long-term Internet stories, the firm expects that Pandora’s stock already reflects this sentiment. After having upgraded the shares at the end of August, the firm is reiterating its Buy rating with a whopping $16 price target.

The latest earnings report is said to have several positives. These were highlighted as improving Mobile RPM, better reporting granularity and leverage on content costs. Canaccord Genuity’s Michael Graham expects these to continue even as the stock has barely recovered from a drastic sell-off after reports of Apple Inc. (NASDAQ: AAPL) coming into the radio market. The analyst calls Apple a significant risk, but he believes that this risk is already reflected in shares. Here are some potential positives and negatives outlined.

• Potential positives: Potential for continued Mobile RPM growth, relatively low expectations with consensus essentially in line with guidance for Q3 and Q4.

• Potential negatives: Potential for continued press and industry speculation/discussion regarding Apple and the competitive landscape, faster-than-expected volume shift to mobile could optically depress mobile RPMs.

Graham concludes, “We like the risk/reward into earnings. We expect the stock to remain quite volatile around a long-term upward trend that eventually acknowledges that 1) Pandora’s user base is likely fairly loyal to the brand and 2) mobile monetization is likely to improve significantly.”

The firm is maintaining a Buy rating with a $16.00 price target, based on 30-times the firm’s 2015 earnings per share estimate of $0.63, which has been discounted to the present at a rate of 11.4%.

What we find so interesting about this call is that it is almost expecting a double. Shares closed at $8.18 on Wednesday, and the 52-week range is $7.08 to $15.25. The consensus price target from Thomson Reuters is only $12.77, and the highest price target shown is $17.00.

JON C. OGG

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