Pandora Stock is a Sell – Why I Dumped My Shares - Investorplace.com
Pandora (P) stock is up about 160% in the last year, and now is the right time for investors in this streaming radio giant to consider taking some money off the table.
That’s what I did regarding Pandora stock. After buying in August when the Pandora stock price was under $20, I sold all my shares on Friday. And here’s why:
Another Pandora stock offering: Pandora Media went public in 2011, raising capital for a build-out and significant growth. But apparently Pandora needs more cash, with plans for a public offering of 10 million shares and an additional 4 million shares allocated to existing stock owners. It’s not the idea of raising more money, per se, that doesn’t sit well with me … Pandora is growing ambitiously and that’s not happening for free. However, the dilution of more than 5% that’s going to happen as more shares of Pandora stock hit the marketplace may be ill-timed as momentum and sentiment wane after a big run and new headwinds emerge.
Insider selling of Pandora stock: It’s not just a secondary offering that risks to dilute the supply of Pandora stock. By my math, some 1 shares of Pandora stock have been sold by insiders since Aug. 1. Now, most amounts are pretty small and labeled automatic sales by the SEC, hinting they are just the standard executive compensation plan where insiders sell a bit of Pandora stock to sweeten their paychecks. But still, the host of sales all in a cluster is unnerving — and puts a significant chunk of Pandora stock on the market at a time when they are planning to offer even more stock to raise cash.
iTunes Radio launch: The indomitable Apple (AAPL) is flying high today on news that its iPhone 5S sales were very strong, and alongside that launch came a refresh of the iOS smartphone operating system that now integrates a streaming radio player. iTunes radio doesn’t have a long track record, but it’s safe to say it will catch on in a hurry. The built-in base of conventional iTunes users gives this product a huge leg up in the competition for streaming radio listeners. Apple is famous for seamless integration of software and devices, and you don’t want to mess with iTunes in any form — streaming or not.
Take these three big warning signs with a forward price-to-earnings ratio that is pushing 100, and it’s hard to imagine a scenario where Pandora can “wow” Wall Street anymore.
Yes, Pandora is still briskly growing and keeps finding new markets overseas and big mobile appeal. And yes, margins can improve dramatically thanks to a focus on direct advertising sales and monetization.
However, I did the math on Pandora stock dilution and competition from Apple iTunes Radio and it didn’t stack up nicely … so I took my 30% and ran.
If you’re sitting on big profits as the Pandora stock price rolls back from $26, I advise you do the same.
[h=3]Related Reading on Pandora Stock[/h]
Pandora (P) stock is up about 160% in the last year, and now is the right time for investors in this streaming radio giant to consider taking some money off the table.That’s what I did regarding Pandora stock. After buying in August when the Pandora stock price was under $20, I sold all my shares on Friday. And here’s why:
Another Pandora stock offering: Pandora Media went public in 2011, raising capital for a build-out and significant growth. But apparently Pandora needs more cash, with plans for a public offering of 10 million shares and an additional 4 million shares allocated to existing stock owners. It’s not the idea of raising more money, per se, that doesn’t sit well with me … Pandora is growing ambitiously and that’s not happening for free. However, the dilution of more than 5% that’s going to happen as more shares of Pandora stock hit the marketplace may be ill-timed as momentum and sentiment wane after a big run and new headwinds emerge.
Insider selling of Pandora stock: It’s not just a secondary offering that risks to dilute the supply of Pandora stock. By my math, some 1 shares of Pandora stock have been sold by insiders since Aug. 1. Now, most amounts are pretty small and labeled automatic sales by the SEC, hinting they are just the standard executive compensation plan where insiders sell a bit of Pandora stock to sweeten their paychecks. But still, the host of sales all in a cluster is unnerving — and puts a significant chunk of Pandora stock on the market at a time when they are planning to offer even more stock to raise cash.
iTunes Radio launch: The indomitable Apple (AAPL) is flying high today on news that its iPhone 5S sales were very strong, and alongside that launch came a refresh of the iOS smartphone operating system that now integrates a streaming radio player. iTunes radio doesn’t have a long track record, but it’s safe to say it will catch on in a hurry. The built-in base of conventional iTunes users gives this product a huge leg up in the competition for streaming radio listeners. Apple is famous for seamless integration of software and devices, and you don’t want to mess with iTunes in any form — streaming or not.
Take these three big warning signs with a forward price-to-earnings ratio that is pushing 100, and it’s hard to imagine a scenario where Pandora can “wow” Wall Street anymore.
Yes, Pandora is still briskly growing and keeps finding new markets overseas and big mobile appeal. And yes, margins can improve dramatically thanks to a focus on direct advertising sales and monetization.
However, I did the math on Pandora stock dilution and competition from Apple iTunes Radio and it didn’t stack up nicely … so I took my 30% and ran.
If you’re sitting on big profits as the Pandora stock price rolls back from $26, I advise you do the same.
[h=3]Related Reading on Pandora Stock[/h]
- Pandora tries to raise $450 million with its stock offering. (USA Today)
- Jon Ogg on the Pandora insider selling. (24/7 Wall St.)
- Of course, not all insiders are selling. Pandora’s new CEO just got 500,000 shares awarded to him. (All Things D)
- My original case for Pandora stock back in August. (The Slant)