You Can Still Short Pandora

I have been bearish on Pandora (P) for over a year now. The stock has plunged massively over the last few months. But despite the fall, I don’t think Pandora has bottomed and would recommend investors to stay away from the stock for the time being. Investors can also consider opening up a short position as the company’s shares recently rallied after CRB recently posted royalty rates.

Despite the new royalty rates, I think Pandora has more downside potential and can be shorted at the current valuation. The reasons for my bearish stance are mentioned below.

Slowing growth

Last year I was bearish on Pandora as the company was reporting steep losses.
Although the company’s revenue was growing rapidly, its high rate of cash burn was a red flag. Pandora has come a long way since then and the company has started reporting profits, however its user growth has slowed down dramatically.

In the latest reported quarter, Pandora missed the analysts’ estimates on revenue and slashed its guidance for the upcoming quarter. With the company’s growth slowing down, I don’t think it will be able to justify its present valuation. Although I don’t think the stock is a compelling short as it was in 2014, I still think the company has more downside to offer and can still be shorted.

Moreover, the company also has to compete against the likes of Spotify and Apple Music. Apple Music and Spotify can further have a negative impact on the company’s growth rate, which is why I think the stock can fall to single digits in the months to come.

Both Apple Music and Spotify have gained customers at a much faster rate than Pandora. While Pandora’s growth is slowing down dramatically, Apple Music is still adding paid customers at a fast rate. With Apple Music still in its early stages, I can see it putting pressure on Pandora in the coming months.


Pandora shorts can still reap 10% profits as I expect the competitive pressure to take a toll on the company’s subscriber growth going forward. With revenue growth slowing down, I can’t see Pandora’s stock turning around anytime soon, which is why I would suggest investors to sell the stock. Investors looking to profit from the expected downtrend can also short the stock at the current market price.
Published on Dec 21, 2015
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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