Pandora's Three Biggest Issues Are Both a Blessing and a Curse

NEW YORK (TheStreet) -- When it comes to Pandora  (P), it always comes down to one of three things, at least for investors.

At times there might be a slowdown in advertising revenue or a decline in total listeners. And then there's the nagging issue of music royalties -- not to mention newfangled competitors such as Spotify and Jay-Z's Tidal or perhaps the inevitable relaunch of Apple's (AAPL) Beats streaming service.

"People are always concerned about all three, and at any single moment there's always one that's not aligning," Amy Yong, media analyst at Macquarie, said in a phone interview. "People are either worried about competition or costs or growth."

For the past three months, though, shares of Oakland, Calif.-based Pandora, the Internet's largest radio service by users, have been on a rebound, gaining 22%. The jump is largely tied to Pandora's ability to show signs of sustainable growth even though the company remains unprofitable, having lost 12 cents a share in the quarter ended March 31; Wall Street's sell-side analysts had been expecting a 17 cent loss.

But the focus with Pandora remains on its ability to grow, and advertising sales surged 27% to $178.7 million in the first quarter while total listener hours increased to 5.3 billion from 4.8 billion during the same period a year earlier.

On Tuesday, Pandora CFO Mike Herring was at JPMorgan's tech media and telecom conference in Boston trumpeting Pandora's acquisition of online music-analytic service Next Big Sound. Its sophisticated computer platform, he said, will be able to supply musicians with data about the streaming of their songs and afford marketers more data about how effectively their advertisements are being consumed.

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