Pandora Media Inc. rose to its highest since early November on an analyst upgrade and speculation that the Internet radio provider will report a surge in registered users and advertising sales.
Pandora’s shares increased 5.5 percent to $14.66 at the close in New York. Earlier the shares were up as much as 9.7 percent. Pandora has regained ground after a decline following the company’s June 14 initial public offering at $16 a share.
The company is scheduled to release fourth-quarter earnings after the close of trading tomorrow.
“Pandora has emerged as a must-have table and connected-device application,” Jordan Rohan, an analyst at Stifel Nicolaus & Co., wrote today in a note to clients. The company has “evolved into one of the few large scale platforms in mobile media, with audience larger than any terrestrial radio broadcaster.”
Rohan upgraded his rating on Pandora to “buy” today and issued a target price of $18. Pandora reported 125 million registered users, “up from our estimates of 105 million in the third quarter, and 100 million in the second quarter,” Rohan wrote.
The average number of people listening to Pandora for at least five minutes during an average quarter of an hour rose to more than 1 million during the 2011 holiday period in the 10 cities with the biggest radio audiences, the company said in January.
The audience has doubled during the past year in some regions, with the biggest growth in New York, Atlanta, Dallas-Fort Worth and Boston metropolitan areas, the company said.
“The service is great, it’s super easy to use and the audience loves it,” Michael Pachter, an analyst Wedbush Securities Inc. in Los Angeles, said in a telephone interview. He has an “outperform” rating on the stock with a target price of $14.
The Oakland, California-based company has focused on attracting users who want to listen to music in their cars. Ford Motor Co., Hyundai Motor Co., Honda Motor Co., Kia Motors Corp. and Toyota Motor Corp. all offer vehicle models with the Pandora service as part of their Internet radio offering.
Joe Kennedy, Pandora’s chief executive officer, who has helped lead the effort to expand in autos, worked at Saturn Corp. for 11 years.
“While Pandora is radio, it is advertising-supported, so the usual theory is that if you get a customer in the car, then they are a captive audience,” Pachter said. “While the average terrestrial radio station advertises about 20 minutes an hour, Pandora is closer to a minute.”
If Pandora “doubles its advertising revenue, either by increasing the number of ads run or raising its rates, it can be very profitable in the next couple of years,” Pachter said. “To get Internet radio in the car, of course you need to pay for the Internet package. This model could work well with other services, such as Microsoft’s Xbox game consoles.”
Pandora may face growing competition from rivals such as Spotify Ltd., the music-streaming company that began offering U.S. service in July.