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Bearish Pandora For the Wrong Reasons

NEW YORK (TheStreet) -- Of all the companies I follow, there has never been one more misunderstood than Pandora (P - Get Report). When I was bullish Pandora, I had to distance my take from bullish, yet very different arguments. Now that I'm bearish, I often do the same.

You must ensure the reasons you're bullish or bearish make sense in support of whatever conclusions you come to. Check yourself. Because, if you don't and your reasons might not logically lead to your conclusion. Worse yet you could be merely co-opting consensus arguments to support your preconceived and desired outcome. This can make for particularly risky investing. Sometimes you'll be wrong and end up right anyway. But that's not a good habit to fall into.

Case in point -- an article published by TheStreet contributor David Meyers last Friday, Pandora's Got Static, Lost 53% in 6 Months.

In the article, Meyers (rightfully) gloats about being on the right side of Pandora stock. He laments moderating growth (which shouldn't come as a surprise; I've been telling you for years that growth would moderate at Pandora). Meyers goes on to make a statement that shows a misunderstanding of Pandora's core business model:

Ironically, Pandora boasted more listener hours this quarter. I fail to see the relevance in this. If the company doesn't have more listeners, it simply means old listeners are listening longer. I fail to see how that is at all beneficial in the long run. Maybe Pandora can squeeze in a few more commercials but that is not sustainable growth ( bold emphasis added).

That's like saying I can't get into Kate Upton because she's a redhead. There's just no legitimate nexus between the point Meyers made and his Pandora bearishness.

Investing and life lesson 101: If you "fail to see" something ask yourself why multiple times. Put yourself through the reflective and introspective ringer.

In this case, what Meyers fails to "see" are the basics of Pandora's primary business model.

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Rocco Pendola writes for TheStreet. He lives in Santa Monica. Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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