Pandora: Crazy Stock, but Focused, Practically Unbeatable Company

NEW YORK ( TheStreet) -- This past Friday I visited Pandora's ( P) Oakland headquarters. The primary purpose of the trip was to tape the first episode of TheBeach Meets TheStreet with Pandora co-founder Tim Westergren. That conversation airs Tuesday morning on TheStreet.

While I was there I had casual chats with a number of different people from the company. I wish everyone had this opportunity. It would instantly clear up quite a bit of investor concern over Pandora's short- and long-term future. This is a sharp, smart and well-run company in perpetual startup mode; seizing its massive opportunity in radio, lndie concert promotion and mobile advertising requires an aggressive, startup mindset.

Allow me to riff a few key points I have basically been making all along, but feel even more confident about after spending more time at Pandora.

One: No matter the fate of the current royalty battle on Capitol Hill, Pandora has a Plan B.

This is not a passive company. It's a focused one. Focused on its core mission -- to build the premier personalized radio experience.

Two: There's a sense you feel when you talk to Pandora employees, including management, that all of the competitive encroachments on its turf -- rumored or real -- validate not only Pandora's success, but its ability to lead the Internet radio space going forward.

People from Pandora have expressed this sentiment publicly; but when it's conveyed in person, the company's shared focus and vision resonates. These guys hit the right note -- they're not overconfident, they respect partners and competitors (particularly Apple ( AAPL), who is both), but they're certainly not about to fall victim to obstacles they've overcome dozens of times along their rapid, un-stunted growth trajectory.

Not one soul at Pandora loses sleep over Apple doing something (that might end up looking more like Spotify anyway . . . let's call it iTunes finally packed with 21st Century features).

But, even if Apple streams music exactly the way Pandora does, there's no guarantee it will do much, if anything, to steal market share. It takes quite a bit of time and money -- money Apple has little reason to invest -- to scale that business to anywhere near Pandora's level.

One thing critics lose sight of -- in both the royalty and competition discussions -- is that Pandora has more leverage than it's commonly given credit for. It's responsible for a growing share of airplay, particularly of artists who receive no traditional airplay, and digital music sales via platforms such as iTunes. It also ranks, consistently, as one of the most downloaded and top-grossing iOS apps.

Everything everybody has done or is rumored to be doing in streaming is a knock-off on Westergren's brainchild -- The Music Genome Project. No challenge to date, including from terrestrial radio giant Clear Channel and its iHeart Radio, has come close in terms of audience size or nailing personalization.

Three: On mobile, all I can say is look out. Recall the data I published from eMarketer several months back. It shows Pandora's place in the presently exploding mobile advertising marketplace. It's right there with Google ( GOOG), Facebook ( FB) and Twitter. Don't forget those projections. They'll be key over the next several years. I bet they'll get revised up.

I'll be curious to see how Pandora did on the mobile front in the most recent quarter. Something tells me the company's CEO, Joe Kennedy, was a bit too cautious when he dampened expectations around the New Year over fiscal cliff-related concerns.

In any event, the folks running ad sales at Pandora get it. There's a reason why terrestrial radio salespeople continue to jump ship for Pandora. They understand the limitations of their old employers and see the future of Internet radio meets mobile.

No amount of competition can change Pandora's pioneer status or erase all it has accomplished as personalized radio for roughly a decade and as a mobile disruptor more recently.

It's a risky stock. For as right as I am about the company, you have to play the stock smart. Noise will come along. There's bound be another rumor, an actual move by Apple or "a cautious mention" from a Wall Street analyst such BTIG's Richard Greenspare.

These wild gyrations are all emotion-based: General market overreaction to the "news" of the day and emotion from a guy like Greenspare, who cares more about being right than learning the inner workings of an industry and the key company that shapes it.

So, at almost $12.00, I might hesitate opening a position. One way to attack the problem is to write out-of-the-money put options, but buying on a dip is likely easier. Pick a floor, put in an order and wait it out. If P never dives again, there will be plenty of upside to support an entry on the way up.

It's just a developing story. It's long-term. It requires patience. It's not going to happen overnight, but, when it does, the believers will crawl from the woodwork.

-- Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.