While Pandora was likely cautious on its last report -- a beat for the November, December, January quarter would not surprise me -- its stock does not trade on the basis of a business outlook. No doubt, it dropped on disappointing guidance with its most recent report, but, again, it refuses to stay down. Ultimately, it trades on noise. Almost every time a competing service gets announced the stock takes a hit. Samsung announced one. Pandora went down. Lowly Nokia ( NOK) and Research in Motion ( RIMM) came to with feeble offerings. Pandora dropped. Then, of course, there's Richard Greenspare of BTIG Media who is due any day now for a cautious mention on P (that's what Briefing.com always calls them). With guys like that unfortunate parts of the conversation, you can never know what to expect. Rumors of a streaming radio product from Apple ( AAPL) have hit Pandora harder than any other. While I don't see the sense in Apple getting into Pandora's business -- it's better off seeking a partnership to integrate Pandora or another existing service into iTunes -- a credible person or two tells me it's only "a matter of time" before it happens.
- Consider it a long-term speculative play. Define long-term in multiple years, not months.
- Look away for no more than 10 to 15 trading days, preferably fewer.
- Allocate no more than 5% to 10% of your portfolio to the stock. How much depends on your risk aversion, size of portfolio, income, etc.
- Write at- or slightly in-the-money calls against at least 50% of your position.
- Sell at least 50% of your position on pops (like the one we're seeing now) or simply watch shares get called away.
- Add to your position on dips, such as the one Pandora just rebounded from.