Pandora Media Inc. shares fell from their early highs Wednesday during a rough day for the broader market, but the Internet radio company’s valuation remains quite healthy in comparison to its peers and ahead of rising competition, according to a story by Matt Jarzemsky at wsj.com.
Pandora’s current stock price, when measured against its reported revenue, suggests the Oakland, Calif., company is about 18 times more valuable than CBS Corp. and nearly nine times more valuable than Amazon.com Inc.–two well-established and profitable companies that, among their different operations, run businesses considered competition to Pandora.
Nonetheless, investors Wednesday piled into Pandora as the stock–expected to price between $7 and $9 as recently as last week–closed Wednesday up about 9% at $17.42. Investors, competing for a limited amount of available stock, are attracted by the site’s rapidly rising number of users and listening hours.
Pandora allows listeners to create up to 100 of their own personalized “stations” of music using playlists based on listener feedback and an algorithm that slots in other songs that users are likely to enjoy. The free service–Pandora makes its revenue primarily through advertising–is available through computers, mobile devices and automobiles.
Kennedy said the company hasn’t given guidance on when it might be profitable. According to analysts, Pandora remains a few years from profitability. The company faces higher royalty payments to music labels and publishers as usage increases, and Pandora has yet to offset such expenses with advertising revenues and user fees.
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