Pandora Media Inc.'s stock soared 15% in very active trade early Thursday, after a favorable ruling on royalty rates late Wednesday prompted some analysts give up on their bearish calls on the Internet radio service. Volume was about 16 million shares in the first 45 minutes of trade, more than double the full-day average, according to FactSet. Analyst Rich Tullo at Albert Fried did a full U-turn, upgrading the stock to the firm's highest overweight rating from its lowest underweight, and nearly doubling his stock price target to $20 from $11. Tullo said what's more important than Copyright Royalty Board's decision to raise the royalty rate for non-subscription services by less than he expected, is that the rate will increase at the inflation rate. "We understand that our views appear to be bi-polar on this name, but the...rate and more important a rational escalator means Pandora can grow if it addresses its flat usage," Tullo wrote in a note to clients. FBR & Co. analyst Barton Crockett raised his rating to market perform from underperform, saying the royalty rate decision "seems likely to clear the path for a global deal, potentially allowing Pandora to launch around the world at some point in 2016 or later." Pacific Crest analyst Andy Hargreaves wasn't impressed. He kept his rating at sector weight but cut his stock price target to $7 from $11, saying the rate increase prompts a "significant reduction" to profit expectations. The stock was still down 21% over the past three months, while the S&P 500 has gained 3.6%.
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