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Why Pandora Might Go As Low As $6 A Share

Summary

Usually when something goes wrong the market knocks down stocks more than we could imagine.

For Pandora, everything has gone wrong. The most important being is its listeners have not grown for over a year now.

If by Pandora's next quarterly report active listeners are not on the rise, I think Pandora's stock will fall to as low as $6 a share.

Unfortunately it almost always ends up the same way. Investors thinking a $30 stock - already a massive bubble - will go to $100 a share because they think high growth will never end, and get burned again and again.

I have called Pandora (NYSE:P) a bubble many times, but not many investors listened. Everyone looks at growth, not paying attention to what they are paying for it.

Like I have said many times, it makes no sense paying for a stock with a sky-high multiple when the stock has incorporated in its price what might happen over the next decade. That is, unless you have a crystal ball that can verify and ensure that growth and earnings will continue and nothing will go wrong. But the last time I checked folks, no one was selling crystal balls.

For the record, my target price of $8 a share for Pandora shares has already been reached (please consider: Why Pandora Fell 35% On Friday And Might Fall Even More).

The stock has bounced a little here and there, however it does not seem to have the ability to sustain a rally.

The latest failed attempt to bounce happened on Monday, when Pandora fell about 10% after management changes were announced, with founder Tim Westergren taking over as CEO. We all know what a management change means, and usually it's not good news. Because it means someone has screwed up and things did not go as planned.

Back in February, the NYT reported that Pandora has retained Morgan Stanley to help find a buyer for the company. But even this was not enough to sustain a rally. In fact the small rally from about $8 to $11 could be considered relief rally, having nothing to...


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