June 17, 2011 It's hard to find too much good news today for the big P. Granted it was only day two, however, there was very little perspective on day one when the stock shot up to $26.00. What's the thinking now that the stock is already down to $13.26 well below the IPO price of $16.00. And that was on an up day for the market. Is this a temporary blip on the road to riches for Pandora? Or are it investors realizing, after being burned during the first bubble, that a profit-generating business model out of the gate really does matter. BTIG analyst Richard Greenfield was quoted in Reuters, he put a sell rating on the stock and a $5.50 price target on it. "Its business model does not scale in the same way as other successful Internet businesses," Greenfield told Reuters. The challenge now for Pandora may be well outside the radio sphere. We all look at it through the prism of radio. Is it radio or not? Are we going to lose listeners? Are they going to steal local revenue? Investors want to know if it's going to be the next Apple or Amazon or Google. Throw in the competitors we know about like the Slackers and iHeartradio and Turntable.fm the others. There are sure to be others we don't even know about yet. This industry moves so fast. Fickle users move on to the next big thing like frogs in a lily pad pond. Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond told Bloomberg "The barriers to entry are not very high, and the innovation is really taking place at the speed of light, they are very susceptible to changing technology and changing consumer preferences."
Users by the millions are even leaving Facebook according to several news reports. Lots of hype about that upcoming IPO as well. John Fitzgibbon, president of IPO Scoop told thestreet.com that "Pandora's IPO proves that only companies with sound financials will stand up in the public markets. It's a classic case of sizzle versus steak. The sizzle came Wednesday in the form of insanity.com but the focus has shifted to the company itself -- the steak." Anupam Palit, a senior equity analyst at GreenCrest Capital told CNBC ?The initial excitement is wearing off and people are starting to see that this company isn?t worth anywhere near its current valuation? His target for "P is $7.50. We'll see who's right and who's wrong in 2 years or five years. Or when the Gods who hold the music royalty key decide who get to live and who will die.
What's your prediction?
Feedback to edryan@radioink.com or leave your friendly post below.
(6/17/2011 10:29:18 AM)
When a company issues a small float, as Pandora did, and it is oversubscribed i.e. more buyers than sellers, the price will spike on opening. Then, pre-institutional holders sell and increase the float which drives down the share price.
Given that we are in a recession the share price may continue to fall. However, Pandora is just coming out of their quiet period so soon, we should start seeing a bunch of announcements and if they continue to execute as they have, the share price will rebound at least somewhat.
Net is that two days isn't a reasonable trading range and it proves nothing. Give it 2-3 months, more like 6 months.
REALLY? at $13 per share a $2.0 billion value???? I am a buyer of the stock at $1.25...maybe...
(6/17/2011 5:37:40 AM)
I think this is more an indication of stock market greed and manipulation than has to do with the reality of Pandora's market value...need to wait to see the reality of that imho.
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