Tune in to Pandora

Despite many skeptics, the Internet music company continues to make progress.

By TheStockAdvisors May 31, 2013 10:03AM

Teens with MP3 player (© RubberBall/SuperStock)By Mike Cintolo, Cabot Top Ten Trader


Pandora Media (P) has a lot of similarities to Netflix (NFLX) -- a new company that's attacking an old (but huge) industry with many other players also looking to get into the field.


That's led to a lot of skepticism (and a big short interest, more than 35 million shares at last count, or seven days of volume), but it hasn't hurt the company itself. In fact, Pandora just reported another great quarter, with management forecasting more good things to come.


Not only did revenue top targets and grew north of 50% again, but all key metrics (listener hours and active users both +35%, paid subscribers +114%, mobile listener hours +47%, mobile revenues +101%) looked great.


Moreover, it's important to note that, right now, Pandora is the largest radio station in the country, accounting for 7.33% of all radio listening in the first quarter, up from 5.86% a year before.


Perhaps most encouraging, as a percent of revenues, Pandora's royalty costs declined nicely, which helps dampen fears that the firm will never exit the red.


All of this isn't to say there aren't risks -- Google (GOOG) recently announced a competing service, although it relies far more on paid subscriptions than Pandora.


And there are endless rumors Apple (AAPL) will enter the market as well. Either of these two gorillas could become an issue. But to this point, none of the many competitive threats have dented this company one bit.


The stock was crushed from its opening IPO price of $26 back in mid-2011 to its low of $7 at the market low of November last year. But since then, the buyers have been in control.


Most recently, the stock etched a nice, tight eight-week zone before breaking out earlier this month and then gapping up after earnings, reaching as high as $19 ... before pulling back sharply to close down on the day.


That's not ideal action, but given the market environment, it's not a major negative, either. If you're game, you could buy some around here, or on further weakness, with a stop near $14.


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