Let’s slow the rush to judgment on this week’s most controversial company.
Pandora (P) has become the Internet stock that everyone loves to hate, just three days after going public. Here’s a brief sampling of headlines from the past 24 hours:
Journalists obviously need to cover a stock’s ebbs and flows, and analyze the underlying company (as I did here). But reaching conclusions based on just three days of trading is sophomoric. Particularly in a week where the broader markets have see-sawed on domestic economic data and Greece’s debt crisis.
Pandora may well become a failed company, particularly if it can’t reach a better royalty agreement with music labels. On the other hand, it may reach such an agreement — particularly as labels keep losing promotional value via terrestrial radio. Plus, advertising revenue should continue to increase alongside subscriber growth. Remember, Pandora does make lots of money. It simply does not yet turn a profit. As Henry Blodget points out:
Amazon lost money all through the 1990s, during which time many smart analysts predicted that it would “never make money.” Now Amazon makes boatloads of money, and it’s worth $85 billion.
This is not to say that the optimistic scenario will play out, or that Pandora will become anything close to the next Amazon. In fact, my best guess is that it will eventually get bought at a relatively low valuation by someone who views it more as a value-added product than as a stand-alone company.
But we simply do not know yet. Even if the long-game bores you, doesn’t Pandora deserve at least a quarter or two of publicly-traded life before getting buried? Maybe wait until the lock-up periods expire on insider shares, to see how they feel?
There is a great desire out there to call the bubble top, and I get it. Most pundits yearn to be accepted as sages, or at least to get regular TV bookings once all hell breaks loose (consider it Roubini Syndrome). But let’s all take a step back and chill out a bit. Maybe tune into some easy listening on Pandora. There will be time to judge the fate of this company and its stock. But that time isn’t today.
