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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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YOU Are The Product...
By rbuszka on 6/17/2011 11:45:25 AM , Rating: 2
In this day and age, there's a simple formula for determining who a media outlet truly views as its 'customer'. If you are paying a price or a subscription fee for the service, you are the customer. If you are not paying for the product, but are seeing advertisements, you are not the customer. The advertisers selling the ads are the company's customer, because the advertisers are the source of the company's revenue, not the users.

(The third option: If you are paying a subscription fee and you are still seeing ads, you're paying for the privilege of being a product. I'm looking at you, Comcast. This is why I do not subscribe to cable TV.)

I currently pay a subscription fee for the Zune service. If Microsoft were forward-thinking enough to offer something similar to Pandora to its Zune subscribers, I would derive real value for it, so I would be fine with increasing my subscription level to have access to it, because currently they do not show ads in their player software.




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