Opened a short position on Pandora at $27 a share and it has now went up to $36 a share. Trying to figure out if it is worth it to double down on the short. This is not a huge amount of money but I feel like it is hard to stick a $7bn valuation on a company not making any money. What are you guys thoughts?
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12/31/13 LOTD :$26.155
This was followed by two pretty strong gap days on Jan 2nd & 3rd. On the 6th there was a huge gap up! Followed by consecutive days of healthy volume & increase in price. Your $27 Put is so far OTM its crazy your thinking of adding to your position. IMO
How are you sizing your lot? What is your stop?
This is just in my brokerage account so it is not a huge position, and it is not an option it is a short position in the shares.
I see. Well I just see a very large bullish movement in the stock, just looking a the daily, weekly, monthly, there is not much downward pressure. I personally would be careful with this.
P is like freakin' Teflon, man. I may have looked at it as a short 1H 2013, but decided against it. If Mandel and the guys at Lone Pine own a good chunk of something I generally think twice before I take the opposite side of their trade.
What's your catalyst?
QFT - those guys are particularly strong in TMT. On P, the business has a lot of running room (now that users have resumed growth post-iRadio), competitive positioning recently validated (see users), and Street estimates are not that aggressive. Not sure how you get paid on that short.
Well said. P looked ripe for a takedown when Joe Kennedy resigned in the Spring and again with the release of iTunes Radio, but appearances can be deceiving.
I like the trade and would agree on doubling down. Do you have a specific price target? (just curious)
If anyone quotes this line as a reason to get out of this short I'm gonna have a damn fit
"The market can stay irrational longer than you can stay solvent"
I swear someone is always quoting Keynes. Using this doesn't make you sound smart so don't use it.
Well it's often quoted in these situations for a reason, right? It may not be literally true unless you a short most of your portfolio, but the point is that shorting just based on valuation is dangerous which I imagine most would agree on. You can go long a company based solely on valuation, you are buying a piece of a business and collecting earnings over time. On the short side you don't have that defense; you're trading, not buying a business, and besides the natural forces of inflation over time is working against you.
But anyway what I would ask is simply, what is special about Pandora that makes it a better short candidate than all the other negative/low-earnings, high-valued internet businesses out there right now? If you're just looking at things from a value standpoint they all look crazy, so I'm curious as to why you pick P over others.
I agree with the quote. I disagree with the overuse of it.
Stop it between 38-40 if it reaches there, sucks but better get stopped than have it run up and up and up. It's hitting up against its trendline (from May '13) so it may be exhausted here at the 36 level, hopefully. RSI is in oversold territory even though the MACDs not confirming anything yet.
What about hedging with a few calls on a down day?
Either way, it's poor risk mgmt to not have a stop. You can always double down on the shorts the day you buy some calls, but at that point you'll probably be complicating the situation even more..
Fundamentally, i agree it's a POS, but so are FB and TWTR. Not shorting them though.
Why? Keynes said it as well as anyone, and it's a point that merits reiteration.
To the OP: What do you see as the catalyst for a correction? A high conviction catalyst within an acceptable time frame is essential because otherwise you'll go crazy wondering when the stock will start moving the direction you want.
So to comment on a couple of you guys thoughts. First in term of a short term catalyst I really don't have one and maybe this is a big issue. Long term I think that Pandora has been increasing listening hours at an impressive rate, but not new monthly users which is a big issue. They also have not shown that this type of platform is profitable. There are a number of competitors in the market (Beats just started their own service, apple, spottily) and after their run-up from 9-36 I think the stock as well as the overall market is overbought. If the overall market sees a downturn I think Pandora will severely underperform on the downside. Also my thoughts are that I can double my position and in one month sell the old short and take a short term loss, which is always a good thing in terms of tax situations.
Why do you think P will underperform in a downturn?
It's always a good idea to know who is on the other side of your trade. On the other side of your short you've got some pretty heavy hitters with real deep pockets who are smart and confident enough to say fuck it and load up on P in the even that it takes a tumble. This is especially true if it is a market wide sell off causing the dip and not something on a micro level.
I'm not necessarily saying you're wrong or that I haven't been on the wrong side of a short before (I have), but you always want a path to getting paid on a position... especially on the short side... and most especially on the short side in the midst of bull market...
I was an avid pandora listener for 3 years... But only the free version. One day I was sick of the ads and looked into alternatives. I found spotify... And I it is amazing. After the 30 day free trial I purchased the service at $10 a month. It absolutely blows pandora away in terms of usefulness and functionality. It brings your music life to a whole new level. Even the free version is great (you can go to any album and just listen to it from that artist, albeit only on shuffle). It is like Kmart to target/walmart. Spotify will be the long term death of pandora, IMO, unless they change some key things.
Seriously though, if you are using pandora check out spotify. You will be glad you did.
Just to chime in on a short.
Spotify is great, and agreed way better than Pandora. It has the same radio feature but as you mentioned can pull songs, albums, etc on demand as well. Unfortunately, access to it is blocked through my work computer (both standalone program and web player), so I'm stuck using Pandora for now.
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