Why Pandora Is Poised to Pull Back

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online radio company has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Pandora and see what CAPS investors are saying about the stock right now.

Pandora facts

Headquarters (founded)

Oakland, Calif. (2000)

Market Cap

$2.4 billion

Industry

Broadcasting

Trailing-12-Month Revenue

$427.1 million

Management

Chairman/CEO Joseph Kennedy

Founder/Chief Strategy Officer Timothy Westergren

Return on Equity (average, past 3 years)

(21.6%)

Cash/Debt

$89.0 million/$0

Competitors

Sirius XM 


Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 66% of the 626 members who have rated Pandora believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those Fools, joshmessages, succinctly summed up the Pandora bear case for our community:

High royalty fees along with new competition on an almost monthly basis makes the 'mostly free' business almost impossible to profit from.

On the free side there is IHeartRadio with seemingly less [ads], HD listening, and straight forward free listening with limited skips.

On the pay side there is Rdio and Spotify which dominate the space and are both growing surprisingly fast.

In the middle there is Pandora which doesn't seem to know whether it wants to be a free service or pay service. ...

There is no road to profit for Pandora.

Pandora has won millions of devotees among music fans but few supporters on Wall Street. The online jukebox seems to be redefining the way we consume music, a transformation that's only likely to grow. But high royalty rates and competition from all corners threatens to silence the company. Can Pandora translate success with its listeners into a prosperous business model that will deliver for investors? Learn about the key opportunities and potential pitfalls facing the upstart radio streamer in The Motley Fool's new premium research report. All you have to do is click here now to subscribe to this invaluable investor's resource.

The article Why Pandora Is Poised to Pull Back originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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