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.If you enjoy the content at iBankCoin, please follow us on Twitter