Why Pandora Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet radio streamer Pandora (NYSE: P  ) have popped today by as much as 11% on analyst comments regarding a congressional hearing.

So what: Yesterday, the House Judiciary Committee held a hearing on the Internet Radio Fairness Act of 2012, which has the potential to change the royalty rates that companies like Pandora must pay. CEO Joseph Kennedy said that Pandora currently faces an "astonishingly high royalty burden" that Congress must address.

Now what: Kennedy said the current structure disadvantages Internet players like Pandora. Albert Fried analyst Rich Tullo believes that the outcome will be favorable for Pandora and could lower its long-term cost structure. The analyst estimates that 60% of the Congressional Judiciary members are either for the bill or undecided. Pandora's content acquisition costs are its largest expense (57% of total costs last quarter), so reducing those expenses could significantly help the bottom line.

Interested in more info on Pandora? Add it to your watchlist by clicking here.


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