Shares of Pandora Media (NYSE:P) are down by a staggering 45% from their highs of the last year, mostly because of investors' concerns about growing competitive pressure from Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL). However, stock prices tend to overreact to negative news in the short term, and Pandora is still reporting vigorous sales growth. Is the recent decline in Pandora stock a buying opportunity for investors?

The reasons behind the decline
Apple is one of the most powerful players in the consumer-tech industry, It's arguably the most valuable brand in the world, and the company has access to practically unlimited financial resources to invest in content and technology. 

Apple CEO Tim Cook recently said Apple Music has over 15 million users, of which 6.5 million are paying subscribers. That means Apple is already the No. 2 industry player in subscription music streaming behind Spotify, which has 20 million paying subscribers, so Apple seems to be making big inroads in the industry at a rapid rate.

Adding to the concerns, Alphabet is launching YouTube Red, a new subscription service that offers ad-free access to YouTube's video library, including music videos and offline downloads. YouTube Red also includes access to Google Play Music and the new YouTube gaming service for $9.99 a month. While the service is just getting started, Alphabet is home to many of the most popular services and applications in the online world, so it's certainly not a competitive threat to overlook. 

Success attracts the competition, and as global consumers are increasingly going online for their music, it's only natural to expect growing competitive pressure from different players trying to grab a piece of the streaming pie. The music-streaming business should provide enough room for companies such as Pandora, Apple, and Alphabet to successfully coexist and thrive over time. However, the fact remains that Pandora is facing rising competition from industry giants with much deeper pockets and enormously popular brands, and this is a crucial risk factor to keep in mind when analyzing a position in Pandora.

What the numbers are saying
Pandora makes most of its sales and earnings from advertising, not subscription fees. This is a big difference between Pandora and most other companies in music streaming, and it could be an advantage if Pandora can consolidate its market position among listeners who aren't willing to pay for streaming services.

Besides, the business is doing quite well from a financial point of view. Total revenue during the third quarter of 2015 came in at $311.6 million, a 30% year-over-year increase. Advertising income grew 31% to $254.7 million, while subscription fees increased 25% to $56.9 million. 

Addressing the competitive situation in the earnings conference call, CEO Brian McAndrews provided an optimistic view of Pandora´s ability to withstand the increasing pressure. In his own words:

Let me address these audience growth numbers directly. This was obviously a unique quarter in the streaming music business. The June 30, launch of Apple Music with its three-month free trial, as well as significant category spending and trial offers across multiple players, brought increased focus to the broader on-demand category during this period.

As we discussed on our Q2 call, we expected some short-term impact to our audience growth as listeners tried this highly promoted new service. I am pleased to say that, given the scale of press and consumer attention on this launch, the impact on our active users and listening hours was muted and was, in fact, consistent with what we experienced during the launch of Apple's radio service in 2013.

However, while Pandora registered an increase in registered users and listener hours compared with the third quarter of 2014, both figures contracted in comparison with the second quarter this year.

Pandora had 78.1 million active listeners as of the end of the third quarter, a 2% year-over-year increase but a 1.6% sequential decline. Listening hours grew 3% versus the same quarter in 2014 and declined 3% compared with the second quarter of 2015. This sequential decline in key operating statistics is a valid concern and is perhaps the main reason Pandora stock has fallen from a cliff lately. 

It will be hard for Pandora to continue delivering strong sales growth unless it can do better on the user front. Whether the recent slowdown is just temporary or a sign of permanent problems resulting from increased competition remains to be seen, but investing in Pandora is a risky proposition until the company proves that it has what it takes to continue growing in an increasingly challenging competitive landscape.