Pandora Media Inc. (P), the largest online radio service, announced yesterday that it has seen over 2.5 million unique activations through its partnerships with 23 car companies, and the heavily-shorted (30% short float) has exploded on the news. Pandora stock finished 8.5% higher yesterday, and buying interest continued overnight and through the early parts of today’s session. By 9:40AM ET this morning P was up another 8%, although it has since faded well off its highs. The question now is, how far can the squeeze in this heavily shorted stock go?
According to Chief Marketing Officer Simon Fleming-Wood, the internet radio service will become available in over 100 car models this, and the company, which has over 70 million monthly users, projects that about a third of all new cars sold in the U.S. this year will have Pandora installed. Pandora currently has deals with major auto brands including Ford (F), Toyota (TM), Honda (HMC), and various General Motors (GM) units including Buick and Chevrolet, and plans to make its radio service available in Dodge, Infiniti, Jeep, Kia, and Ram brands in the near future. Approximately half of all radio listening takes place in automobiles, and Fleming-Wood referred to them as, “the traditional home of radio,” making them a key battleground in the $15 billion local radio advertising market that Pandora is looking to capitalize on.
Despite companies like Apple (AAPL) announcing internet radio competitors, Pandora’s stock has nearly doubled this year and looks like it could be setting up for another run. The online radio’s stock has a high IBD Relative Strength Rating of 91, however it is 17% off its 52 week that was reached after the most recent earnings report on May 24. The shares went down 12% on June 3 after Apple (AAPL) announced its iRadio service, but the stock has rebounded impressively since then.
Perhaps the fundamentals for Pandora are not all that compelling, but it only takes a spark to ignite a big short squeeze in a stock with a 30% short float. Short-term traders should be keeping a close eye on P, and if the company can fend off competition, perhaps it could be a long-term winner, too.
Disclosure: No position