Pandora (NYSE:P) sits at all-time highs as analysts and institutional investors are turning bullish. JPMorgan just boosted its price target to $35 while reiterating an overweight rating, expecting Pandora to begin improving monetization as its market share grows and selling efforts accelerate. That follows another bullish analyst note from earlier this week from Needham & Co., which assigned a $33 price target on Pandora, in part due to opportunities in cars. Hedge funds have also started to increase positions in the third quarter. Pandora reports earnings next week, so investors are optimistic about what the online music streamer has in store. 

One of Pandora's challenges has always been its ability to scale, since it lacks operating leverage. Companies with high variable costs do not see margins scale with revenue in the same way that companies with high fixed costs do. In Pandora's case, its primary costs are content costs and royalties. However, Pandora may be able to scale ad revenue faster than costs as it focuses on growing its salesforce.

In this segment of Tech Teardown , Erin Kennedy discusses analysts' enthusiasm for Pandora with Evan Niu, CFA, our tech and telecom bureau chief.