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Pandora shares drop on downgrade, analyst says streaming market 'crowded'

Traders on the floor of the New York Stock Exchange walk past the Pandora Media logo on its first day of trading as a public company.
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Traders on the floor of the New York Stock Exchange walk past the Pandora Media logo on its first day of trading as a public company.

Shares of Pandora Media dropped more than 3 percent in early trade Monday after an analyst downgraded the company, saying in part the on-demand subscription streaming market has become too crowded.

Spotify, Apple, Alphabet's Google, Tidal, and now Amazon are all offering competing products and it'll be hard for Pandora to persuade users off those services, according to Bank of America Merrill Lynch on Monday.

"Even with Pandora differentiating on auto playlist creation, we think it will be hard for Pandora to attract 10-15 [million] paying subs," research analyst Nat Schindler said, who downgraded the stock to "underperform" from "neutral."

"...Especially because switching users off other services that have invested time in building out their personal playlists will be extremely difficult," he said.

Schindler also gave the company a price target of $9, down from a previous target of $14.

The analyst also noted that Pandora's $4 billion in revenue goal by 2020 looks too ambitious without both "listening hour and advertising monetization acceleration."

With Monday's decline, Pandora's stock is down more than 7 percent year to date.

Pandora 2016 Chart