Pandora Media (NYSE:P) has seen a dramatic sell-off of its shares, but the company continues to see healthy improvements on its fundamentals. Pandora has seen heightened competition in the Internet music streaming marketplace with many new entrants, but the company has seen all its major metrics increase. The big plummet in its stock price represents an attractive valuation for Pandora.

Fundamentally strong
In the last two months, Pandora has seen robust growth in listener hours and its total number of active listeners. Pandora saw its May 2014 listening hours increase 28% year-over-year to 1.73 billion, and the number of active listeners on its platform grew 9% year-over-year to 77 million.

Pandora's top-line revenues increased 69% year-over-year to $194 million, but the company swung to a loss per share of $0.14. Advertising revenues for Pandora increased 45% year-over-year to $141 million and subscription revenues grew 192% year-over-year to $54 million.

Subscription revenue growth
Pandora has a strong foothold on mobile as consumers are leaning toward listening to free online music on the go. In Q1 2012, Pandora's mobile-based revenues stood at 51% of total revenues with 76% of Pandora's total sales coming from mobile where revenue grew 92% year-over-year.

Pandora's content acquisitions costs are a little heavy and might even go up in the future as music rates are being examined by the U.S. Justice department, and as a result might be a major headwind for Pandora.

However, the company is accelerating its monetization, especially from subscription based users. Pandora's paid subscription business has a lot of growth potential from current levels of roughly 3.5 million subscribers. Subscription revenues in Q1 2014 made up 27% of Pandora's total revenues and if the current growth rate can be sustained for a few more quarters, it will be a much bigger piece of Pandora's revenue pie. 

Pandora implemented a modest price increase for the Pandora One subscription plan in May from $3.99/month to $4.99/month, but only for new subscribers. Existing customers will keep paying $3.99/month, and the company is ending the annual pay plan. These pricing plans will lead to incremental revenues from Pandora One in the future.

Monetization is strong
In the last quarter, Pandora's total RPM (ad revenue per thousand listener hours) increased 50% year-over-year to $40.51 and its advertising RPM increased 34% year-over-year to $33.40. Pandora's growth in RPMs was driven by better pricing and sell-through rates. To ramp up future monetization efforts Pandora is looking to collect more local ad revenues. The company already has a sales-force presence in 37 markets, and intends to collect revenues from the remaining 239 local markets. 

Pandora is coming up with more innovate ads, like Promoted Stations, which will enable advertisers to guide consumers to their custom content. Pandora has ramped up its integration efforts in the auto industry, and is now available in all the top 10 best-selling cars and has 5 million active auto users. Pandora started advertising in cars last quarter, but the ad potential is limited because there are no display or video ad opportunities available. 

Heightened competition
Pandora faces stiff competition as there have been a number of new entrants to streaming music. Apple(NASDAQ:AAPL) grew its footprint in the online music streaming business with the acquisition of Beats, which will go along with its iTunes Radio service.

Spotify has more than 40 million active global users and 10 million paying subscribers to its service. In addition, Pandora's Internet rival, iHeart Radio, recently crossed 50 million users. 

Also, Amazon came out with a music streaming service, Prime Music, which has over 1 million songs. Pandora has done well in the face of intense competition, and should hold onto its leading position. 

The bottom line
Pandora's stock price got beaten up in the wake of competitive threats. The company has very strong metrics and can improve its monetization down the road. Pandora's management expects revenues of $213 million-$218 million in the current quarter, which implies a revenue growth rate of 39%-42%. The company's total usage and user base are growing, and Pandora is a very attractive buyout target for a number of large tech companies. The pull-back in Pandora's stock price is a buying opportunity.