NEW YORK (TheStreet) -- Pandora Media (P) shares are falling 6.56% to $16.49 in early market trading on Tuesday after Apple (AAPL) announced that it is releasing Apple Music, a music streaming service, later this month.
The announcement was made at Apple's annual Worldwide Developers Conference in San Francisco yesterday with the service set to launch on June 30.
Pandora's shares closed trading down 3.75% yesterday following the announcement.
Apple's music streaming service enters competition in an already crowded field that consists of Spotify, the newly launched Tidal and Pandora as the current market leaders.
As of the third quarter 2014, Pandora has 76.5 million active users, while Spotify had approximately 60 million active users. As of late last year 51% of internet users listened to music on Pandora while 14% used Spotify, according to industry watcher eMarketer.
Insight from TheStreet's Research Team:
Eric Jackson commented on Pandora in a recent post on RealMoney.com. Here is a snippet of what Jackson had to say about the stock:
One of the early down stocks today, ahead of the Apple Worldwide Developers Conference in San Francisco, is Pandora Media P. As of this writing, the stock is down 1.5%.
This is, of course, due to the expected announcement today that Apple is launching a new and improved music streaming service. Apparently, the company was trying to finalize deals with all the key music labels over the weekend.
Yesterday, VentureBeat printed this quote from Sony Music's leading executive about the new service:
"It's happening tomorrow ... What does Apple bring to this? ... Well, they've got $178 billion in the bank. And they have 800 million credit cards in iTunes. Spotify has never really advertised because it's never been profitable. My guess is that Apple will promote this like crazy and I think that will have a halo effect on the streaming business. ... A rising tide will lift all boats. ... It's the beginning of an amazing moment for our industry."
Although he didn't mention Pandora, the comment about Spotify is damning by association. Pandora also didn't have profitable EBITDA in the past year. However, does that mean the company is doomed? I don't think so.
- Eric Jackson, 'Is This the End for Pandora -- or a New Beginning?' originally published 6/8/2015 on RealMoney.com.
TheStreet Ratings team rates PANDORA MEDIA INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PANDORA MEDIA INC (P) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been generally deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 66.8% when compared to the same quarter one year ago, falling from -$28.93 million to -$48.26 million.
- PANDORA MEDIA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This year, the market expects an improvement in earnings ($0.19 versus -$0.15).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.28% compared to the year-earlier quarter.
- Compared to other companies in the Internet Software & Services industry and the overall market, PANDORA MEDIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 40.24% is the gross profit margin for PANDORA MEDIA INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -20.91% is in-line with the industry average.
- You can view the full analysis from the report here: P Ratings Report