Breakout

Pandora’s Pop: Is it a Trend or a Trap?

Breakout

In ancient Greece, Pandora was the original woman, and is best known for carrying the evils of the world around with her in a little box. As the story goes, to open this box is to unleash a torrent of bad luck that cannot be stopped.

In modern California, Pandora (P) is an internet radio company that has been publicly traded for about 14 months. As the story goes, to own the stock was to unleash a torrent of bad performance on your portfolio, as the shares plunged from $2o to $8 in their first year.

So hated was Pandora that the short interest -- or bets against it -- had grown to 29 million shares, says Jon Najarian, co-founder of TradeMonster.com. That works out to almost one-fifth of its total float, or more than ten days worth of average trading volume. Which explains why a better than expected break-even quarter and a slightly positive forecast sent the stock soaring to a 5-month high.

"I still wonder whether Pandora is a real business or if you just caught a lot of people short," Najarian says in the attached video, adding that he ''wouldn't be a long time buyer" just yet in the music stock -- or the broader social media group.

Interestingly, Najarian speaks more flatteringly of LinkedIn (LNKD) and Facebook (FB), the latter of which he still owns a chunk of. But for all the walls or moats they have, Najarian is characteristically hedging his short-term risk in America's most disappointing company.

"Like everybody else. I've been watching the stock die at $19," he says, before adding his wish to see COO Sheryl Sandberg or CEO Mark Zuckerberg "get out there in front the earnings report to rally the shareholders."

His short-term play on Facebook is through what's known as a spread, he says, disclosing that he's long the stock as well as the October $20 calls, while being short the October $22 calls.

"I get double the bang for my buck between $20-22," he says, pointing out that "if Facebook goes above $22 he won't participate, but won't get killed either."

What do you think? Has Pandora turned the corner or is it simply a short-squeeze?

Rates

View Comments (35)