Why Pandora Media Inc. Stock Plunged Today

Is Pandora Media's drop meaningful or just another movement?

Jul 8, 2014 at 3:57PM

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 music streaming specialist Pandora Media (NYSE:P) plunged by as much as 10% Tuesday amid a broader pullback in the tech sector. 

So what: Today's drop extends yesterday's nearly 6% slide, but it's worth noting that Pandora Media stock had already jumped nearly 35% prior to that since early May. The tech-heavy Nasdaq Composite dropped by 1.4% Tuesday, pulling many high-flying tech names down with it.

Now what: But Pandora, in particular, faces concerns over whether its previously impressive growth is stalling. While Pandora's adjusted quarterly revenue grew 54% year over year in the first quarter, listener hours and active listeners only rose 12% and 8%, respectively, over that period. That doesn't mean Pandora can't still make operational improvements to achieve sustained profitability over the long term, but I personally remain content watching from the sidelines to see how the company fares when it announces second-quarter results later this month.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. The Motley Fool owns shares of Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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