Seems like Pandora is doing just find when it comes to adding listeners and brushing back competitors like iTunes Radio. But Wall Street smells blood: against a raft of missed expectations and profitability concerns, shares of P have plunged nearly 50% since March.
According to The Street analyst Rocco Pendola, this could get a whole lot bloodier before the year ends. “Take it from the guy who was bullish Pandora stock at eight bucks a share and then bearish at $36 — Pandora’s at its most vulnerable right now,” Pendola noted this week.
“And it’s well within the realm of possibility that the company collapses under its own stubborn and short-sighted weight in 2014 or thereabouts.”
Part of the problem is advertising, or rather, way too much advertising. That has always dragged down traditional radio stations, but Pendola argues that Pandora is now overloading its service with endless takeovers and interruptions. “Pandora might argue that it has no choice but to saturate the masses with advertising,” Pendola argues. “It has to increase revenue. And it must find a way to keep ahead of content costs.”
“That’s what Pandora always comes back to. It’s the poor victim — as its executives get filthy rich — of royalties so it has no choice but to do things to offset this injustice.”
Pandora is now fighting an all-out war with content owners, which makes it highly unlikely that royalty costs will ease. But why isn’t Pandora pursuing other revenue streams, whether premium subscriptions or selling data? “The other guys are not standing still whereas, outside of its advertising efforts, Pandora absolutely is,” Pendola continued. “This state of affairs might not have mattered six months, one year or two years ago. But it does now.”
“Pandora’s arrogance will catch up with it.”