Goldman Sachs analyst Heath Terry told investors that "if Pandora doubles advertising, increases its mix of local commercials to half of all ads and leverages fixed-content costs," the stock could go as high as $60.PANDORA MEDIA INC NYSE: P Jan 30 03:32 PM loading chart... Price: 36.85 | Ch: 3.93 (10.7%)
"The next two years are critical for the development of Pandora's long-term revenue trajectory and royalty rates," Terry said.
The stock pared some of its gains after hitting the all-time high and was trading just below $37 at 1:30 p.m. EST.
While the Goldman rating explains today's boost, there are other bullish signs for Pandora stock in 2014...Pandora Stock: Behind Today's Meteoric Rise
Currently, Pandora accounts for approximately 8% of all radio hours in the United States. The radio company boasts more than 76 million active monthly users who listened to 1.58 million hours of radio in December.
Approximately $15 billion is spent each year in the United States on radio advertising, but Pandora draws in less than 1% of U.S. radio ads. Company officials are hoping to up that percentage by reportedly opening sales offices across the country.
Another positive sign for Pandora is its continued integration into today's "smart automobile."
According to the company, more than 4 million people had used Pandora's native integration system to access Pandora in their vehicles as of Jan. 6, 2014. The same statement mentions that 23 major auto brands incorporate the Pandora technology currently.
"Nearly half of all radio listening takes place in the car. We knew early on that to redefine radio, we would need to seamlessly deliver Pandora through in-dash entertainment systems," Pandora's Chief Marketing Officer Simon Fleming-Wood said. "With an 8.60% share of total U.S. radio listening and unmatched growth and adoption of Pandora in the car, we are now seizing the opportunity to connect advertisers with a more targeted audience than traditional radio can provide."Then there was this development from Consumer Electronics Show 2014 (CES 2014): Pandora announced that it would begin in-car advertising to tap into that huge ad market. It's already signed on major national brands including BP (NYSE: BP), Ford Motor Co. (NYSE: F), State Farm, and Taco Bell.
That is a major step forward for tapping into that $15 billion radio advertising industry, and the emerging smart car industry.
Money Morning's Defense & Tech Specialist Michael Robinson recently told readers how big the auto-tech boom could be for investors. As cars become "smarter," companies will do everything they can to get into this burgeoning market.
"[The connected car] is loaded with complex sensors, sophisticated software, and advanced semiconductors," Robinson said. "This embedded tech ecosystem is one of the big reasons why the industry sold some 15.6 million vehicles last year, in no small part because drivers want their smartphones and cars to stay connected to each other."
Pandora has made strides to be a radio leader in the "connected car" - a promising move for its stock in 2014.Is Pandora (P) Stock a Buy?
Pandora stock posted an astounding 195% gain in 2013, but 2014 hasn't been as kind. Since Jan. 1, the stock has dipped 6.5%. That was until today, when Pandora reached its all-time high.
It's often risky jumping into a stock when it's trading near all-time highs, but Pandora's recent actions are a good indication of future growth. The company won't stay content with just 1% of the radio advertising industry and has plans for controlling more of that market.
According to Yahoo! Finance, 16 analysts list Pandora as either a "Strong Buy" or "Buy," nine rate it is as "Hold," and only two rate it as "Underperform."
Cautious investors should keep an eye on Pandora's advertising revenue and its integration into the auto market. If it moves forward on both fronts, Pandora stock could reach Heath Terry's lofty goals.
The Federal Reserve continued its taper yesterday, but there's no guarantee the central bank will stick to its plan... especially if the economy falters. We could see some surprises in 2014.
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