This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Why I'm Long Pandora: Opinion

Stocks in this article: P

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Early last week, I introduced two media stocks I consider sells -- Netflix (NFLX) and Sirius XM (SIRI) -- and six I consider buys -- Rogers Communications (RCI), Bell Canada (BCE), Time Warner (TWX), Disney (DIS), Pandora (P) and Madison Square Garden (MSG).

Later in the week, I outlined my bull case for both Rogers and Bell, and today I'll explain why I like Pandora.

When I go long media stocks, I do so with a time horizon measured in years, not months and weeks. I also consider five key criteria when making my selections:

  • Massive and/or rapidly growing revenue
  • Multiple, diverse streams of revenue
  • Multiplatform delivery of premium content
  • Direct control over premium content
  • Ubiquity

Although the other long plays, by and large, score high on all five counts, Pandora does not. That's one reason why it's easily the most speculative of the bunch.

"Massive and/or rapidly growing revenue." Pandora wins here, particularly in the "rapidly" category. The company's revenue is not necessarily massive, but it has soared 1,819%, from $14.3 million in the 2008 fiscal year to $274.3 million in the 2012 fiscal year. Revenue increased 99% between the 2011 and 2012 fiscal years.

"Multiple, diverse streams of revenue." Although Pandora does have two primary revenue lines, they're too lopsided to truly deserve the "multiple" tag and not dynamic enough to be "diverse" or truly synergistic.

Advertising makes up roughly 87% of 2012 fiscal-year revenue, whereas subscription and "other" revenue make up just 13%.

Advertising will always dominate, but Pandora can and should look for ways to pump up the subscription and "other" line item.

I will expand on this in future articles, but the recently-introduced Pandora for Business initiative and the addition of a la carte subscriptions for premium programming represent down-the-road possibilities.

"Multiplatform delivery of premium content." Pandora scores well here. The company delivers its content via the Web and mobile devices ranging from smartphones to tablets. You can also stream Pandora through a television via streaming players such as Roku.

"Direct control over premium content." I classify Pandora's content as premium because each user can take what is ultimately easily accessible content and allow Pandora to tailor it to his or her tastes.

That's the power of the Music Genome Project and the reason why so many people choose Pandora over other Internet radio services. This interactive user experience also promotes the discovery of new music that users might not have otherwise found.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,856.20 +28.45 0.16%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs