Pandora (P) is higher in afternoon trading after shares were upgraded to Outperform by BMO Capital, which cited better than expected subscriber numbers and positive channel checks on audio ads, among other things.

POSITIVE CHECKS ON ADS, WIDER AUDIENCE: BMO Capital analyst Daniel Salmon this morning upgraded Pandora to Outperform from Market Perform, saying that despite a lack of near-term catalysts the market underappreciates longer-term factors. In a note to clients, Salmon specifically called out recent positive channel checks on audio ads among several industry executives, as well as the potential to widen Pandora’s audience and improve the margin profile over the long term, calling changes to Pandora’s business model “underappreciated.” “Up until now,” Salmon said, “Pandora has primarily been focused on recorded music and has offered limited forms of other content — some podcasts like the Serial. However, Pandora now plans to expand the content available and we expect this to accelerate in 2018.” Additionally, the analyst noted that Pandora’s subscriber business is running ahead of expectations, despite being in a very competitive market, which offers a more visible revenue stream. Finally, Salmon said that after a CEO change, an eventual takeout by SiriuxXM (SIRI) is possible and believes it could happen at $12 per share.

WHAT’S NOTABLE: Pandora reported mixed results earlier this month, with active listeners at the end of the quarter of 73.7M, down from 76M at the end of Q2. Roger Lynch, the company’s CEO, commented at the time that “there’s no silver bullet that’s going to come in and solve these problems,” but said he believed advertising investments will start to take hold in 2018. Earlier this year, Pandora agreed to accept an investment from Sirius and sold its Ticketfly unit. Prior to that, The New York Post said Pandora and Keith Meister of activist fund Corvex Management “bungled” a chance to sell the company for $15 per share.