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Pandora is Already Past its Prime

Pandora can't seem to catch a break, and neither can its shares


Pandora Media (P) —’s (AMZN) Prime service may be a terrible thing for margins, but it certainly seems to bring in customers, as the company’s top line continues to grow dramatically. The strategy seems to be market share now, figure out how to grow margins later.

Now, Amazon announced it will be streaming music to its Prime customers — something else that is likely to be good for revenue but not great for the bottom line. The stock sold off on the news Thursday, but the company that is likely to suffer the most from this move in the short term is Pandora.

Unprofitable for years and facing rising licensing costs, this music streaming pioneer now has to compete with the likes of AMZN and Apple (AAPL). While shares didn’t suffer nearly as much as AMZN on Thursday, the stock was turned back from resistance to close nearly unchanged.

P started to fall back right at the top of a rising wedge. A wedge like this forms during a downtrend and is usually completed with a breakout to the downside below the pattern. If completed, the rising wedge’s initial downside target is equal to the widest portion of the pattern projected below support, or $20.50. If downside momentum remains strong, a break below $20 is a reasonable secondary target.

P Stock Chart
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There seems to be a little “profit-taking” going on this week, so a few bearish trades might make sense. In a situation like this, unprofitable firms facing new competition could gather much more momentum to the downside than their more fundamentally sound peers, and P seems to be moving further and further past its “prime.”

John Jagerson and Wade Hansen are the editors of SlingShot Trader, helping investors capture options profits trading the news by using a proprietary 100% news-driven trading platform that turns event-driven pricing inefficiencies into fast profits. Get in on the next trade and get 1 free month today.

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