Explaining Pandora's Resiliency

| About: Pandora Media (P)
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When Apple's (NASDAQ:AAPL) iTunes radio was announced in June, just about everyone thought that the biggest loser will probably be Pandora (NYSE:P), who is the number one Internet music streaming service company.

However, contrary to mass sentiment, not only has Pandora's stock not tanked since then, it climbed to record levels recently.

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Apple recently said that its iTunes music service had 11 million unique visitors since September 18 when iTunes was rolled out. That was a small shock to Pandora's shareholders, because if Apple continues at this rate, it will surpass Pandora in a very short time.

However Pandora executives don't seem to be worried. In fact they have almost encouraged Apple's iTunes service. As reported by Bloomberg, Pandora's founder Tim Westergren sees only a modest impact from iTunes. In fact he sees the entry of iTunes as a positive even for Pandora. What gives, is he right? I think so.

Speaking for myself, I only listen to radio in my car, or on my smartphone when there is something specific I want to hear. Other than that I will listen to streaming music from my desktop. So streaming radio is not just something in style, it's the future.

While streaming radio and radio stations have been around forever, only recently have listeners been able to fine-tune what they actually want to hear with services like Pandora. The fine-tune element is what will make these services popular and indispensable to most listeners.

Streaming music services as well as streaming movie companies like Netflix (NASDAQ:NFLX) are the new wave and the future of broadcasting. And just like there are many different smartphone makers, operating systems and devices, likewise there is room for many streaming music services.

Even if iTunes takes a big chunk of the total market during the next several months, it does not mean that Pandora's listener base will fall. Just as Apple's market share has decreased over the past year -- yet they sell more devices -- likewise the total listener base for streaming services will increase over time. In other words, the pie will get bigger and everyone will have more listeners, even if they have a smaller percent of overall market share.

For the reasons stated above and contrary to popular opinion, Pandora's stock has not fallen since Apple announced iTunes, but instead almost doubled. Will this resiliency continue? I think so.

Is Pandora a buy?

Not in my book. This stock is another app bubble stock, like the many I have written about over the past several months. Buying any stock at 8 times sales and almost 50 times book value is simply too risky in my book. Sure it's a great swing trade and momentum play stock, but other than that, this stock should not be in any long-term conservative portfolio.

Also, even though Pandora has not been affected by the Apple iTunes move so far, it remains to be seen if this resiliency will continue for long (I personally think it will), because Apple has a bad habit of making great services and products and takes everybody by storm.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.