Two brokerages started coverage on Pandora Media Inc with positive ratings citing its exciting long-term growth opportunity, given the growth in Internet radio and the ongoing shift of advertising dollars to the Web and mobile environments.
Shares of the online radio company, which has been around for a decade and lets listeners create music playlists, fell a percent after rising 4 percent in early trade.
Pandora is well positioned to take share of the US online display, mobile and radio advertising markets, J.P. Morgan Securities' Doug Anmuth wrote in a note, adding that it represents a $37 billion opportunity by 2014.
Pandora competes against traditional radio companies, satellite radio provider Sirius XM Radio Inc, music services such as Rhapsody and offerings from Apple Inc, Google Inc and Amazon.com Inc.
Anmuth, started Pandora with an overweight rating, saying it has opportunity to monetize its listener hours better.
(Pandora's) ability to monetize mobile hours will improve over the next few years and drop down to the bottom line.
Pandora's mid-June initial public offer was underwritten by Morgan Stanley, JP Morgan, Wells Fargo Securities, William Blair & Co, Stifel Nicolaus Weisel and Citi. It's about $2.9 billion market value is equivalent to about 20 times last year's sales.
Wells Fargo Securities' Jason Maynard started the stock with an outperform rating, and said the leader in internet listener hours represents just 3.6 percent of all radio listener hours, providing ample share gain opportunities.
But Stifel Nicolaus started it with a hold rating, and said Pandora's share in Internet radio in the U.S. could narrow slightly on new competition such as Spotify and Turntable.fm.
Pandora shares, which made a debut on the New York Stock Exchange at $20 -- 25 percent above the IPO price, have shed 35 percent of their value over the last one month. They were down about a percent at $18.17 in early trade on Monday.
(Reporting by Saqib Iqbal Ahmed in Bangalore; Editing by Prem Udayabhanu and Joyjeet Das)