Wall Street can be a tough crowd, as seen with the situation at Pandora Media Inc (P). Today, Pandora announced that its founder, Tim Westergren, will once again take the helm. But investors are far from enthused. So far in early trading, Pandora stock is off about 9% to $9.90.
The news is certainly a surprise, and could also mean that the prospects of a buyout are fading. What’s more, the boardroom has been a revolving door.
Consider that since Pandora came public in 2011 there have been three CEOs. This definitely does not help against the intense competition wrought from a host of players like Spotify, Sirius XM Holdings Inc. (SIRI), Apple Inc. (AAPL), Alphabet Inc (GOOG, GOOGL) and Amazon.com, Inc. (AMZN).
What This Means for Pandora Stock
But of course, for Pandora stock holders, the real issue is the buyout. Yet, Pandora CEO Tim Westergren seems focused on the long haul, as indicated by his recent statements. In February, Westergren said this in an interview with Bloomberg: “This company is best run by us. We have the team. We have the building blocks of an enormous, standalone independent, large company.”
Then in Monday’s release, Westergren boasted:
“We are pursuing a once-in-a-generation opportunity to create a massive, vibrant music marketplace. We have the audience, the technology infrastructure, the monetization engine and most importantly the right team with the passion and commitment to do it.”
Such talk should not be too much of a surprise, actually. Let’s face it, Westergren is passionate about music and has spent that last 16 years building his business. So any short-term gains with Pandora stock may not mean much. Instead, he probably wants to see his vision realized.
In fact, Pandora has already been making some major moves. There was the acquisition of Rdio, which should help the company go beyond its online radio roots and get a piece of subscription-based streaming. At the same time, Pandora purchased Ticketfly, which will allow the company to capitalize on e-commerce.
With these deals, Pandora now believes its addressable market has ballooned from $45 billion to a whopping $200 billion.
However, this ambitious strategy won’t be cheap, which is not good news for Pandora stock holders. For years the company has lost money, and now it faces even heavier competition from Live Nation Entertainment (LYV), the dominant player in ticketing and live events.
In the meantime, the core business of Pandora seems to be, well, out of key. For example, during the past year, user growth has flatlined, with the total at about 81 million. Revenue growth has also been underwhelming. It was up only about 26% during 2015, to $1.16 billion. And yes, Pandora posted a loss of $170 million.
Bottom Line on P Stock
Back in early February, Pandora got a boost because of a report from the New York Times suggesting the company was looking to sell itself. No doubt, there would likely be interest, despite the challenges. Pandora has a strong brand, fairly loyal users and a treasure trove of data.
But all this may not matter. With Westergren now at the helm, the focus is likely to be on trying to realize the potential growth opportunities. After all, why sell now when P stock is down more than 50% since October? Might as well wait for things to get back on track, right?
Perhaps so. But, this is not the message investors want to hear. In other words, Pandora stock may be listless for some time.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.