- A judge will rule that Internet radio royalty rates must come down
- Magically, mobile will be a more lucrative ad sell than desktop
- And, somehow, amazingly, Pandora will capture every single person in the country as a subscriber. You know, just like Reed Hastings thinks Netflix (NFLX) will
Can Pandora Hit $40 a Share? Focus on page two of that article. It's not that I'm about to jump off of the bandwagon; I'm just not as fired up about the company as I once was. I see cracks that, quite frankly, have little to do with what has critics "concerned" this week -- the allegedly "updated" risks section Pandora filed with the SEC attendant to notification of the stock offering. As if this seemingly universal concern from the armchair Pandora watchers, after how wrong they have been, means anything? Talk about click bait. This Greg Sandoval article is little more than filler between display ads: Pandora sees more risks to its business. Lazy journalism 101. Did Sandoval bother to look at previous Pandora filings, such as its annual report for the fiscal year ending January 31, 2013? I guess not. Must have been too much work to open two browser windows and compare the documents against one another. I read through the new filing and previous ones. There's nothing "more" or new here, at least not if you have paid close attention to Pandora since it went public. There's a lot of boiler plate and a bit of management saying cool your jets, we face the same challenges we always have. Even Elon Musk at Tesla Motors ( TSLA) recently admitted he thought Wall Street had gotten ahead of itself with his company's stock. And I can tell you this -- because I know for a fact -- Musk was feeling this way as early as late May when TSLA only traded for around $100. It's called managing expectations. Pretty standard practice, which is likely part of the reason Pandora gained back all it lost and more on the secondary news during Tuesday's trading. Plus, it's not like the company's set to fall off of a cliff.
If Sandoval and others had been doing their homework they would know that Pandora executives have been, for a couple years now, not so much cautioning, but stating the obvious to those of us who asked and are willing to listen: At some point, the company's rapid growth will moderate. These guys are incredibly forthcoming if you show them you're trying to get it right. Case in point, a January 2012 Seeking Alpha article I published after one of several conversations with former Pandora CFO Steve Cakebread. Anyhow, Pandora's problem(s) isn't what you see the media focus on. It's not a problem that royalty costs are prohibitively high, mobile ad rates have not caught up with desktop rates or listener hours and other key metrics might moderate. They're not problems at least in the way I choose to define "problems." They're realities. A difference between the two words does exist. The helpless pessimist looks at these things and says, They're problems. I guess we're screwed. They rely on external forces -- things often beyond their direct control -- to dictate their fate. Others feel content to rely on a wing and prayer.