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Pandora Media, Inc. Message Board

  • thatrob55 thatrob55 Nov 11, 2012 6:50 AM Flag

    Here's why Pandora is worth $56.21 per share:

    Based on Spotify successfully raising capital this past weekend at a "slightly over 3 billion dollar valuation" one can conclude that a conservative valuation for Pandora shares is $56.21.

    According to the press release, Spotify has slightly less than one quarter of the active monthly user base of Pandora and around a third of paid subscribers at similar fees.

    Both companies face the same potential challenges in terms of competition from Apple. In fact, many reports suggest that Apple's forecasted streaming service would more closely mirror that of Spotify.
    I'm not convinced that Apple is going to be so inclined to go forward with these plans that are presently more than baked into the cake of the Pandora stock price.

    The Pandora $56.21 per share price estimate based on the Spotify successful raising of capital does not take into account the important aspects of branding. The Pandora brand name carries much more weight than Spotify. This should not be underappreciated for numerous reasons including takeover prospects.

    I have recently concluded purchasing a long position in Pandora as of November 9th based on what I perceive as a gross underestimation, lack of appreciation and overall misunderstanding of their product and financial potential.

    The belief that they will be unable to monetize the service in a successful and sustainable fashion, over the of course time, is grossly misguided. Moreover, the lack of appreciation of peoples regular radio listening habits is also glaringly obvious. Pandora has become so entrenched into our culture across many demographics that doubting their ability to conduct business successfully, should Apple proceed into the space, is far overblown. I can recall predictions of Amazon's stock price going to zero once Walmart made public their intentions of selling merchandise online. Clearly this didn't materialize.

    Furthermore, there is a potential upside to Apple going forward with music streaming. It will discourage small startup companies from bothering to enter and challenge what will be perceived as "too many giants to fight." An elimination of these hungry, energetic startups can keep Pandora from being wounded by "1000 paper cuts". This can be every bit the potential danger as the competition from Apple.

    The crowded number of shares sold short in Pandora will turn out to be yet another catalyst of a stock that will begin a meteoric rise before too long.

    All of the above is just one man's humble opinion which includes the bias of being a new long term holder of Pandora shares. (Long P)

    Sentiment: Strong Buy

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