Consider some numbers and color Herring provided on the call:
I would say that, some of our competitors have 1,300 sales people in 80 markets. I think we're likely to put a decent number of sales people, maybe double where we are today, across 40 to 50 markets, and cover the rest through inside sales and technological solutions.
This isn't about RPM and CPM and all the jargon analysts like to impress one another with. It's about Pandora providing the digital, mobile and creative capabilities on everything from traditional radio spots to video ads to sponsorship opportunities at personalized Pandora Presents concerts. Again, it's about feet on the ground, meeting demand and shifting ad spend from broadcast radio to Pandora.
It's important to look at what McAndrews said on the call and realize Pandora has acknowledged the reality of its growth curve for at least as long as I have been following this company:
You know, I would say on the January metrics, there's a law of large numbers at some point, and we are very large, and so we're going to obviously see some declines in growth. But on the other hand, we still feel very good about that growth and as I mentioned in my remarks, one of our key strategies is to make sure we're continuing to invest in that growth.
So the cats who like to chirp about slowing growth at Pandora as if it's some gotcha moment are, simply put, full of it. What they need to focus on is Pandora's scale, which allows it to sell advertising effectively. As it expands its sales infrastructure it can sell more advertising. And, now that it has proven to the world that it can be profitable, it can ramp up investments in the spirit of the Amazon approach.
Of course the stock dropped in after hours trading. But it will bounce back because of everything I discuss in this article and more (e.g., I didn't even get into auto integration, consumer products placement, UI improvements, etc.).
You have to step back and place some perspective around the run Pandora's stock has had.
Have a look ...
When you go on that type of run, there comes a point where the overused phrase priced to perfection actually comes into play. Nothing short of a blowout quarter and blowout guidance could make the stock move after 188% upside over the last year.
If you're smart, you took some cash off of the table ahead of the report. If you didn't, you're probably wise to have done so after the numbers came out. There's never anything wrong with taking profits.
This is not a short-term trade (unless you want to get short). It's a long-term stock that you hold as a core position (hopefully having had banked profits along the way) and add in increments over time. Of course, this assumes you believe in Pandora's long-term story.
At this juncture, there's no reason not to. Even if you, like me, cast a critical eye on matters such as data.
--Written by Rocco Pendola in Santa Monica, Calif.