Will Pandora Continue Its Surge Higher With a New CEO?

With shares of Pandora (NYSE:P) trading around $24, is P an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Pandora is an Internet radio company that operates in the United States with over 125 million registered users. Pandora's Music Genome Project and its playlist-generating algorithms predict listener music preferences, play music content suited to the tastes of each individual listener, and introduce listeners to music they will love. The main sources of revenue for the company are advertising as well as subscriptions. As the Internet music boom continues, Pandora is well-positioned to capitalize on potential subscriptions and advertising marketing share.

Pandora has finally tapped a new CEO after announcing in March that current CEO Joe Kennedy was stepping down. Former ad executive Brian McAndrews will take Kennedy's place. McAndrews was likely attractive to Pandora because of his experience in the ad world, which could help the Internet radio provider find new ways to monetize its service. Pandora needs to step up its game in the face of high royalties and new competition from Apple's (NASDAQ:AAPL) rival iTunes Radio.

T = Technicals on the Stock Chart Are Strong

Pandora stock been surging higher over the last several quarters. The stock is currently trading at highs for the year and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Pandora is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Pandora options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Pandora Options	53.74%	16%	15%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Pandora’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Pandora look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	1200.00%	-11.11%	-69.72%	100.00%
Revenue Growth (Y-O-Y)	51.18%	59.07%	53.81%	59.99%
Earnings Reaction	-12.89%	-4.25%	17.56%	-17.46%

Pandora has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have expected more from Pandora’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Pandora stock done relative to its peers Sirius XM Radio  (NASDAQ:SIRI), CBS (NYSE:CBS), Cumulus Media (NASDAQ:CMLS), and sector?

	Pandora	Sirius XM Radio	CBS	Cumulus Media	Sector
Year-to-Date Return	164.70%	33.39%	44.73%	95.51%	39.83%

Pandora has been a relative performance leader, year-to-date.

Conclusion

Pandora is an Internet radio company that attempts to match listeners with their preferences in order to discover music they love. The company has just revealed who the new CEO of the company will be. The stock has been rising higher in recent quarters and is now trading at highs for the year. Over the last four quarters, earnings have been mixed while revenues have been rising, however, investors have expected more from the company. Relative to its peers and sector, Pandora has been a year-to-date performance leader. Look for Pandora to continue to OUTPERFORM.