Pandora Following Script That Could Keep Crushing Shorts

NEW YORK (TheStreet) -- I'm not sure why I let this stuff bother me so much.

I guess, at the end of every hard-earned day ... if I expect to still find some reason to believe, I need to cue up Springsteen and then call out financial media injustice. This time with respect to Pandora (P).

It's a shame to see Seeking Alpha, the site that provided me and so many of my friends and colleagues with an excellent platform to learn and grow from, devolve into a sweatshop for uninformed and poorly-researched "Short Ideas."

There's a "contributor" to Seeking Alpha who stands out among the handful who constantly publish bearish Pandora proclamations. This person only rises from the pack because his short theses do not stand up to even the lightest journalistic eyeball or most casual edit.

I presume Seeking Alpha has stopped using editors because the ones I worked with between 2011 and 2012 would have never let this sort of tripe get past them.

In "Quoth the Raven's" most recent Pandora piece, he tells us that ...

Clearly, the active listeners have started to hit some type of plateau ...

He makes this case void of any context whatsoever beyond what he can pull from his clearly uninformed and shamefully opportunistic perch.

First, moderation in the growth of listenership, whether you choose to use listener hours or active listeners, has been expected for years. It's expected as a general function of the broad business Pandora runs in. But it's also expected by Pandora's own admission.

This is where Seeking Alpha is culpable. Any good editor would have directed this "writer" to do a search for the Pandora ticker (it's 'P') at the very Web site he writes for. He would have, after about a minute and a half of searching, come across the articles I cited in this week's Pandora: The Definitive Look Back and Look Ahead.

These linked articles, published at Seeking Alpha, explicitly state -- in my own words and in the words of Pandora's CFO in 2012 -- that Pandora would see growth moderate. Anybody who has even studied the dynamics of Pandora's business understands this. It's not the shocking relevation "Quoth the Raven" makes it out to be. It's not something Pandora has been hiding from us and does not want us to see.

There's absolutely zero smoke and mirrors here.

As transparent as can be, Pandora has been anticipating and preparing for moderation in growth for years. Certainly longer than this person has been producing hack journalism for a once-respected Web site. And, like the good business it is, Pandora has clear-headed ideas on how its business will play out.

The leveling off of growth coupled with increased advertising revenue (Pandora just recorded its first $100 million mobile as sales quarter) and content costs eating up a smaller percentage of revenue ... it's a dynamic you have to bring into any conversation you have about Pandora, whether in 2011 or today. Without it -- and a discussion of how Pandora generates advertising revenue and how that will continue to change and mature over time -- you have nothing but an ignorant, if not intellectually negligent short case.

I outline what lies ahead for Pandora, clearly, in no uncertain terms in the above-linked article. Step-by-step, point-by-point using a look back and a peek forward, all steeped in what has become years of research and hours of conversation with people from all levels within Pandora and throughout Internet radio/the music industry.

It's called hard work. And homework. The type of thing that gives you the confidence to get behind the market's most-hated stock at its lows. Now that P is one of Wall Street's most beloved tickers, Seeking Alpha continues to allow these flimsy and borderline unethical bear cases to be made.

What makes this even worse is that you could, quite credibly, float more-than-reasonable Pandora short theses. Given my knowledge of the company I could present a more sane, logical and well-informed one than "Quoth the Raven," even though I would have to discipline myself to play devil's advocate in the process.

The moderation in growth is a non-factor at Pandora because, it has been long accounted for. It's the Internet radio actors who have not built up the necessary scale to sell meaningful amounts of advertising or survive under the subscription model that we should be worrying about.

And, as much as people want to make it so, Apple's (AAPL) iTunes Radio, isn't out to kill, crush or even slightly harm Pandora by default or by design.

I have held back writing this article for months. My inclination is to not give free publicity to those who do not deserve it. But, in complete and total seriousness, Seeking Alpha, by virtue of being associated with this material, does itself, its readers, wider audiences and both the financial and broad media a grave disservice.

I know Pandora quite well. That doesn't mean I always have been or always will be right on the trajectory of the company or stock. It does, however, give me license to let you know something -- most of what you read about Pandora -- even on the bull side -- does not come as the result of rigor.

That's sad because you can get there by sending a few emails, making a couple phone calls and setting an appointment or two with Pandora executives who are more than willing to engage in the most straightforward manner, openly discussing successes as well as areas of concern.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is a columnist for TheStreet. Pendola makes frequent appearances on national television networks such as CNN and CNBC as well as TheStreet TV. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.

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