Sell Pandora: Stock Could Crash on Bad Strategic Investments

NEW YORK (TheStreet) -- I'm not sure about you, but this is pretty much useless to me:

"Those be" the contents of an email I received from Pandora (P) Thursday. The company was nice enough to remind me that I'm a diehard Bruce Springsteen fan who shares an affinity for Tom Petty.

As if the fact that I think of Springsteen and The E Street Band every morning when I wake up doesn't already do the job.

I'm not saying sell P because the company sends master of the obvious emails to its user base or appears to consider adding a recommended stations feature to its mobile application progress. I'm saying sell P because these illustrations, coupled with what the company's not doing ... scratch that ... with what the company refuses to do with any sort of urgency spells something like doom.

I have become of two minds on Pandora lately.

One mind logically tells me the company's core narrative remains intact. You can review that still relevant train of thought in Here's Why Pandora Keeps Crushing the Market.

So, with that in mind, I might be saying sell too soon. A run higher -- even much higher -- would not shock me.

However, I've been largely bullish on Pandora stock since it hit lows in the neighborhood of $7-$8 per share. To stay behind a stock -- and the company that floats it -- when there's very little beyond what brought it to the district of $35-$38 seems a bit off. Put another way, after a 400% run, there's got to be something more compelling to warrant continuation of the chase.

Right now, from what I gather, there isn't. In fact, I think Pandora is doing a horrible job, based on what it says publicly and what I think I know, of reinvesting in its business. In fact, it seems to act as if the most potentially prolific parts of its business do not even exist. 

I stress ... I can only go on what I know.

Pandora has never been a company to run its mouth. Even to me. One of its biggest supporters. But I always got the sense in my conversations with executives and such that it had its stuff together. I knew the company would climb the mountain using the means to an end nobody on Wall Street or in tech seemed to understand.

And it did.

But now I get the sense Pandora's trying to squeeze water out of a rock. It continues to expand its sales infrastructure to poach more advertising dollars from broadcast radio, however, I reckon it's about to hit a point of diminishing returns. In others words, I don't see the investment it puts into advertising generation producing the same types of returns it did in the past. A whole bunch of bodies and newer and/or bigger offices in cities across America doesn't come cheap.

On the sales front, Pandora's bark might end up being bigger than its bite.

As I have riffed over the last few weeks here, here, here and here, Pandora should be investing aggressively in areas related to, but beyond straightforward, traditional -- even if its "targeted" -- advertising. But it's not. While it should not abandon its advertising core (obviously), it's simply not going to grow the business rapidly enough or win itself any friends in the royalty fight by focusing almost solely in that area. 

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