My Pandora bull case centers, as it has for months, on the company's ability to sell targeted, mutli-platform advertising at the national and local levels. Having worked closely with terrestrial radio sales departments over the years, I can tell you that they do their best work selling stations and individual shows that own the same and similar attributes as Pandora.
After you consider what Pandora can put into the hands of its growing sales force when it hits the street, it's easy to see how the gig should be like shooting fish in a barrel for just above-average salespeople, let alone good ones.Even the Wall Street guys who deserve some credit, such as Doug Anmuth who raised his price target to $35 last week, present obvious cases far too reliant on quantitative metrics. I read his notes. And they don't sufficiently speak to the more important qualitative case investors need to know to better understand and make informed decisions on Pandora. That's part of the problem on Wall Street, even when analysts get things right. They're mired in old models, while the rest of the world tends toward dealing with stocks on the basis of the "story." Focusing on the story -- or a company's narrative -- came into vogue somewhere in the past five years or so. And with good reason. Who in the world would put money into so many of the market's top performers on the basis of numbers alone? Amazon.com ( AMZN). Netflix ( NFLX). There would be little, if any, demand for shares of these companies if we lived and died by the numbers. Investors buy the story. They buy the vision. And I don't blame them.
Our $35 PT is based on our DCF model through 2020, which assumes a 12% cost of capital, 4% terminal growth rate and a 13.0x terminal EBITDA multiple. Key Drivers of our DCF projection include 2012-2020 CAGRs of 37% and 114% for Revenue and EBITDA. Our PT is also equates to ~7x FY2015E revenue of $958M.I know what that means, but I still find myself walking away asking, What the hell does that mean!?. And, more importantly, does it really matter as much as it did in 1985 when I was a 10-year old checking the prior day's closing prices in the local newspaper? Anyhow, here's a pretty clear case that explains why Pandora crushed $30 followed by links to previous articles to seek color on each point and thoughts on what might go down next with the stock: Color on point one (and two) in Pandora Steps Up Its Game in a Big Way from October 2013. Color on point two in Buy Pandora, Sell Zynga and Fire Its CEO from August 2012. Color on point three in The Edge That Will Send Pandora Past $30 from last week predictive of the move past $30. Heading into Pandora's Thursday earnings report, you would be insane to not sell at least a portion of your profitable position (I'm not sure anybody could still be holding an unprofitable one). Why take the risk headed into the report? Do I think they'll have a strong report? Yes. Pandora remains a strong company. However, if the results are not perfect -- or close to it -- there's no place for this stock, up 300% over the last year, to go but down. If you miss additional upside, so be it. There will be more than enough opportunity to ride the fruits of Pandora's long-term future. The metrics the tortured shorts throw at you, day-after-day on sites such as Seeking Alpha, mean much less than they want you to believe. Get to know and understand the story few of us outside of the company have been telling since Pandora went public. Follow @rocco_thestreet -- Written by Rocco Pendola in Santa Monica, Calif.