Pandora (P -13%) closed near its session lows, as investors who watched shares rise 136% from the end of 2012 decided to take profits in response to the Internet radio leader's mixed guidance and decision to do away with its 40-hour mobile monthly listening cap.
Stifel, explaining its downgrade to Hold (the firm upgraded in March, when shares were much lower), argues Pandora's story "has shifted back from a focus on margins, including constraints on hours streamed, to a focus on market share at the expense of margins." The firm is also worried subscriber growth (fueled the FQ2 beat) will slow with the listening cap's removal.
On the CC, Pandora admitted sub growth is likely to slow. But the company argued its ability to better "monetize those hours from 41 onward" (as evidenced by its surging mobile ad RPM) makes the move easier to digest.
Pandora also mentioned it paid Yahoo $8M to buy an IP portfolio that includes "several fundamental Internet radio patents dating to the late '90s," and that it believes Apple's iTunes Radio content cost is "probably somewhat below what [Pandora's] current content cost is."