Follow-up On P Comments From Yesterday

Yesterday we noted that Pandora (P) would report earnings after the close. Estimates were $.01 versus $.02. There is considerable upside to our price target, $11.28, which is based on Cash Flow Return on Investments (CFROI) as well as profitability and growth of assets. Trillions of dollars are managed on a CFROI basis. We note this is a purely quantitative ranking,

We  noted the short ratio was 9.79 which means if the company beats then the shorts will be running for  cover. Our upper bound target is $14.89. This name bottomed at $7.50 and has a gap down at $12.50 that needs to be filled.

So how did we recommend to play it? Aggressive traders buy shares before the close. Less aggressive traders could be a 1/2 position and add or not add on Wednesday morning.

Another strategy  which we recommended would be to buy the stock and buy a December $9 put for $1. If the stock rips, then you give up $1 of upside and are protected on the downside.  Options for December show a bias to the call side BUT there are lots of December 8 Puts with open interest at 16,959.

The result. So Pandora beat estimates by a wide margin $0.04 but warned on Q4 as companies are cautious on ad spending heading into a potential fiscal cliff. The CEO will be on CNBC at 11:40 a.m. EST.

The stock is now at $8.00 and we wrote this up pre market. It opened at $9.11 yesterday. The put is at 1.20 in value whic h is joke but shows the premium. We will take the $0.20 cents out and bring our cost down to $8.91. Let’s see where the stock trades post the CEO interview and whether to sell shares and move on or stay with it.