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Some analysts think it will be a long time before Pandora turns a profit, if ever

Pandora is an internet radio company that has been around for more than ten years. The company has not been publicly traded until recently when Pandora had its IPO. Early on shares in the company soared as high as 48% from the IPO price.

The problem was that the stock then turned around in late trading and prices tumbled, yet it still ended up above its opening price. That means that people who bought early are still doing well enough on the stock, but those that bought later in the day are facing a loss in a single days trading. The reason for the about face on the stock has to do with concerns of whether or not Pandora will even be profitable.

The problem is that Pandora is growing its user base very quickly and the ads sold to support the network aren’t growing nearly as fast. This raises concerns of whether or not Pandora will be able to turn a profit in the future. 

Pandora listeners are also migrating more and more from listening via their computer to listening on a mobile device and mobile ads are worth even less than ads on computers. Pandora CEO Joseph Kennedy said, "We are tremendously focused on providing a great listener experience and that's what has gotten us to this point."

The stock's IPO price was $16 per share and it closed the day at $17.42 per share. Some analysts are calling for investors to avoid Pandora stock for now. Analyst Rick Summer from Morningstar has a target price on the stock at $6 per share. The WSJ reports that Pandora CFO Steve Cakebread thinks that its margins will improve as listener hours slow down. 

Cakebread said, "[We should] improve operating margins as our listener hours slow down." The WSJ also lists the value of Pandora at $3.1 billion fully diluted and notes that a limited float of 95 is driving shares up higher than the first day of trading.

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RE: The problem with Pandora is simple...
By MrBlastman on 6/16/2011 4:23:42 PM , Rating: 2
You came for music.

That's great.

Did you come for music for free at their expense--i.e. they act as a music charity?

Please, cry me a river. They are a business. They need to cover the costs to provide YOU, the consumer, music. The shareholders should also expect this.

If you don't like the ads, pay the 35 bucks a year subscription fee. It isn't much. If you use it as much as you act like you do, it is a small investment in their future success.

By NellyFromMA on 6/20/2011 1:42:18 PM , Rating: 2
I'll quit my crying if you quit cheerleading.

No, seriously, I'm not expeting things for free, but I'm dissatisfied with it and if their ads are so obnoxious (and they are) between there volume difference, skipping sound, and annoying visuals and basically picking from a pool of 2 different advertisers every 4 songs, I have every right to bash them. It's called word of mouth. Get over it. That's the impression they left on me.

Why would I pay for a service when they fail to impress and actually make me feel somewhat intruded on with their poor free service being a sort of 'ultimatum' if you will to sway me into a subscription. That's bad business as it rubs people the wrong way. Again, get over it.

Marketing is key. Not alieniating your base.

"Game reviewers fought each other to write the most glowing coverage possible for the powerhouse Sony, MS systems. Reviewers flipped coins to see who would review the Nintendo Wii. The losers got stuck with the job." -- Andy Marken
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