Although Pandora is a popular Internet radio company, will it prove a good investment? In the following video, Jeremy Bowman and Isaac Pino examine three reasons to steer clear or sell.

First, Pandora's revenues aren't translating well into profits. The company uses advertising for revenue, but more than half of its revenue is spent on content costs. Unless revenue rises or expenses fall, Pandora may struggle in a fast-changing, competitive market.

Second, radio is a mature industry, and traditional FM radio has advantages over Pandora in royalty costs. Further, Pandora has to overcome significant industry red tape that further hampers profitability. In fact, Pandora had to leave the Canadian market because of royalty payments and other issues.

Finally, Pandora faces significant competition -- among them, Apple, which sent Padora's stock down when it announced its intentions to enter the Internet radio market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.