Boston, MA 11/26/2014 (wallstreetpr) – Pandora Media Inc (NYSE:P) rules the Internet radio business. The company controls nearly 70% of the market, according to an article published by the MarketWatch. However, such high-profile status also comes with a fair share of challenges. According to the analysts tracking the streaming radio company, content cost is a matter of serious concern for the company, and investors should take notice.
Some changes in royalty fee that the company and its peers pay to copyright holders are expected. However, the expected changes are likely to increase the cost burden for the company. In fact, content acquisition is already one of the highest costs that the business faces. Competition in the streaming music space means that copyright holders are keen to get the best out of their products. That usually means squeezing more from the companies that use such content.
The Copyright Royalty Board is in the process of adjusting cost structures for 2016-2020. That poses high risk for Pandora Media Inc (NYSE:P) in terms of huge content cost. Because the company is likely to face higher content acquisition bills, analysts at FBR moved to adjust their rating and target price on the stock.
The analysts downgraded Pandora Media Inc (NYSE:P) to “Underperform” from “Market Perform”. They also cut their target price on the stock to $11, citing the potential content cost risks. However, the analysts said they were confident that Pandora has solid revenue potential. That is because of its quality services and continued user acquisition. However, even user acquisition at Pandora has slowed down in the recent times, mainly because of the competition in the streaming music space.
Pandora faces competition from tech giants that include Google Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN).
With heightened competition in the industry and content cost challenges, Pandora Media Inc (NYSE:P) may have to look for new opportunities to boost revenue while cutting costs. Such efforts should support improvement in the bottom line and cushion the company from the inflated content cost.
Pandora Media Inc (NYSE:P) after forming a based at $18.51 started to move up again. Pandora Media Inc (NYSE:P) traded on higher volume in yesterday’s trade, However the stock continues to trade below its 20-Day EMA of $19.78. The stock has a RSI of 47.17.