Pandora Media Inc. (P), the biggest online radio service, fell the most in more than a month after an analyst said that Apple Inc. (AAPL) will be an effective competitor for people who listen in cars.
The shares dropped 8.5 percent to $17.97 at the close in New York, the biggest decline since June 3. The Oakland, California-based company’s stock has almost doubled this year, while the Russell 1000 Index has added 16 percent.
Pandora faces a new competitive threat from Apple, which is integrating hands-free voice controls into automobiles and introducing a new iTunes Radio service, Richard Greenfield, an analyst at BTIG LLC in New York, wrote in a report. The analyst said he has been testing a pre-release version of Apple’s radio service.
“Apple is leveraging its expertise in marrying hardware and software design to strengthen their ecosystem as they try to take a more active role in the ‘connected car,’” wrote Greenfield, who recommends selling Pandora shares.
Gaining access to listeners in cars is a key part of Pandora’s strategy to win more of the $15 billion market in local radio advertising in the U.S. More than half of radio listening occurs in automobiles.
Pandora, which is available in cars for devices operating on Apple’s iOS and Google Inc. (GOOG)’s Android software, is available in 23 automotive brands and 100 car models, Chief Marketing Officer Simon Fleming-Wood said in an e-mailed statement. The company expects one-third of all new cars sold in the U.S. this year will have Pandora installed, he said.
“The connected car has been a core part of Pandora’s strategy for many years and we have a strong position in the market,” Fleming-Wood said. “This kind of broad availability gives us unmatched listenership and we are confident in our competitive position in the automotive space.”
While Apple’s built-in voice controls, called Eyes Free Siri, will navigate to any application, it defaults to its own programs when a user makes a music request, Greenfield wrote.
“Apple is clearly favoring their native music app with radio based commands,” Greenfield said. “If you were in Pandora and used Siri with the command ‘play Jazz Radio’ it would literally stop Pandora, open up iTunes Radio and starts playing the iTunes Radio Jazz station.”
Greenfield said he expects Google to take a similar approach to Apple in marrying hardware and software design when it debuts a YouTube music service in the year ahead.
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