On Tuesday, the largest Internet-based radio platform fell 3.1% to close at $17.51, extending its two-day slide to 6.8%.
Apple announced to much fanfare on Monday that it will start a subscription-based streaming service at the end of this month. Unlike Pandora, which is largely advertising-based, Apple Music will require a $10 per month subscription though it is offering a family rate for up to six people of $15 per month.
"I think the market always fears this competition, though it should come to no one's surprise that Apple is doing this," said Amy Yong, an analyst at Macquarie Group Limited.
Following Apple's announcement, Pandora founder Tim Westergren took a defiant tone, saying that business at the online radio service is growing despite "countless 'Pandora killers.'"
"It's increasingly clear that personalized radio is the future, and building a great personalized radio product is fantastically hard to do," Westergren said in an emailed statement. "As we've seen for years, new products attract trial users, but the real question is sustained attention."
Since 2013, according to Pandora, listener hours are up 25% and its share of radio listening market has grown to 10% from 8.6%.
But Pandora executives remain steadfast that its ad-based model will endure because consumers have come to expect that listening to music, whether on terrestrial radio or Google's ( GOOG) ( GOOGL) YouTube, is free. Finance chief Michael Herring, speaking on CNBC, said listeners have come to embrace Pandora's customized radio stations that evolve based on their past listening habits.
"We lead the industry in terms of ad-supported radio," Herring said in the CNBC interview. "We think that that's going to be a competitive advantage for years to come."