Pandora is Already Past its Prime

by John Jagerson and Wade Hansen | June 12, 2014 6:14 pm

Pandora Media (P[1]) — Amazon.com’s (AMZN[2]) 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[3]). 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.

Click to Enlarge

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.”

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Source URL: https://investorplace.com/2014/06/trade-day-pandora-media-p-stock/

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