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I'm Playing a Different Tune on Pandora

Picture of Pandora's Logo

I'm beginning to warm up to Pandora (P). I don't think I have a choice at this moment.

Although I didn't give the internet music giant a glowing endorsement ahead of its first-quarter earnings report, after dissecting Pandora's 8K, I have to give the company credit where credit it due.

Aside from the 55% jump in revenue, the fact that advertising revenue rose at a much quicker pace than listening hours, is no small accomplishment.

This is pretty important to this business model, especially since much bigger media companies like CBS (CBS) have suffered through weak ad spending.

What's more, margins are beginning to improve. And perhaps more importantly, Pandora's subscription business has become a bigger part of its revenue, increasing to 16%.

The company's 2.5 million subscribers still pales in comparison to Sirius XM's (SIRI) 20 million self-pay customers, but it's improved from the 1% that Pandora had leading into the quarter.

What does all of this mean? While Pandora is still a dominant platform in the realm of music streaming, many investors are still betting on the company's demise.

I don't know if this is still a good bet, though. Not when Pandora is growing active listeners at an impressive rate of close to 40%.

I do wonder, though, if now is not the right time to take profits? The stock has more than doubled since December. Besides, not only has Google (GOOG) entered the music streaming realm, but Apple (AAPL) is also coming to the table.

Can Pandora stand up to these two giants? They don't play to lose.

However, though, Apple has remained silent on the matter. But it's the logical next step, given the successes of both Sirius and Pandora, Apple sees an opportunity to differentiate itself from Samsung and other mobile devices manufactures like BlackBerry (BBRY).

However, for Pandora, the biggest question hinges on the fact that the ad-based model has not been extraordinarily profitable, whereas Sirius has become a cash-flow machine.

Pandora will likely be squeezed out of the market, which is what the shorts are betting on.

The question here is how long will it take for either Google or even Microsoft (MSFT) to make a bid for Pandora? Plus, once Apple officially announces its entry, which is expected to occur at the company's Worldwide Developers Conference, what will Pandora's stock look like? 

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Stock Tickers: CBS SIRI GOOG AAPL BBRY MSFT Author Disclosure: At the time of publication, Richard held shares of Apple and had no positions in the other stocks mentioned.