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Music-streaming service Pandora just lost one-third of its value… in one day.
The Street reports Pandora Media, Inc. (NYSE: P) lost 40 cents per share in the third quarter of 2015. Analysts had predicted a profit of 10 cents per share.
The underperformance caused shares to plummet 35% on Friday. They’re now trading at their lowest point in two and a half years.
Competitors Spotify and Apple Music (which launched in June) sliced into Pandora’s market share.
But there’s more at work here than just normal market forces…
Regular Daily readers know Pandora is a former “unicorn.”
[“Unicorns” are private companies valued at over $1 billion. Pandora was valued at over $3 billion when it went public in June 2011.]
There are now 141 unicorns in existence. Their total valuation exceeds $505 billion. The majority of these companies are tech startups, like Snapchat and Pinterest.
These media darlings have exciting stories and sensational “hypergrowth.” (Snapchat didn’t even exist 50 months ago… but the “disappearing” messaging app is now valued at $16 billion.)
Snapchat has yet to earn 1 cent in profit. But that hasn’t stopped investors from blowing a gigantic Silicon Valley bubble…
Here’s what Tom wrote about the situation back in the June issue of Tom’s Confidential…
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Aswath Damodaran, a guru in corporate valuations, is sounding the alarm. He recently said the market is a victim of the “ladder of pricing. Investors and founders are arguing that if ‘A’ is worth ‘X’ billion, then their own company must be worth near or above ‘X.’” Notice that revenues and earnings aren’t mentioned. Instead, investors and founders alike are setting their valuations simply by looking at their competitors. That’s like Blackberry ($5 billion) asking for (and receiving) Apple’s valuation ($800 billion) because they compete with one another. Bill Gurley, one of the most renowned private (angel) investors, thinks there’s a “complete absence of fear.” Gurley thinks 2015 is the year in which the bubble will pop. We’ve found the perfect way to profit from this bubble… |
Tom revealed a basket of put options as the best way to speculate on the air rushing out of the Silicon Valley bubble.
Pandora was one of these companies.
Subscribers who took Tom’s advice are now up 73.8% on the trade in under three months. That follows a 221% gain on Internet review app Yelp… and three other trades sporting high double-digit gains.
If you’re interested in making a “Smart Speculation” in this sector, there’s still one actionable put option position in the portfolio. All Palm Beach Infinity subscribers can click here to access the trade inside Tom’s Confidential.