Pandora Media soared in its debut Wednesday, but then glided back toward earth on a volatile first day of stock market trading for the Oakland-based Internet radio company.
The online music company wound up with a nearly 9 percent gain Wednesday following its initial public offering.
Pandora Media finished with a market value of $2.78 billion Wednesday. By day's end, Pandora was the 77th most valuable company in the Bay Area, out of 465 public companies. It was the 10th most valuable East Bay company, out of 85 public companies in that region.
"This is a strong company, with a strong following," said Rob Enderle, a San Jose-based technology analyst. "It has a pretty nice story."
Pandora is riding an Internet IPO boom that is the biggest for the sector since 2000.
The surge in Pandora's stock defied a nose-dive in the overall stock markets. The Nasdaq tumbled 1.8 percent, the S&P 500 fell 1.7 percent and the Dow Jones Average fell 1.5 percent. The Dow fell 178.84 points to close at 11,897.27.
"We have an enormous opportunity ahead of us," Pandora Chief Executive Officer Joseph Kennedy said in an interview on Bloomberg TV. "We see the opportunity to continue to provide a great service to more and more people. We are also investing in this tremendous opportunity to redefine what radio is."
Pandora rose 8.8 percent, gaining $1.42 to finish at $17.42. Pandora priced its initial public offering at $16. In early trading,
Founded in 2000, Pandora Media has never turned a profit and has stacked up $92 million in losses. The lengthy record of red ink has produced some discordant notes among analysts who think Pandora's shares are overvalued.
"Pandora has strong brand awareness, but investors want to look a little deeper at the financials," said David Menlow, president of New Jersey-based research firm IPO Financial. "If you are not making money now, investors want to know what are your prospects for making money."
Sales, however, have been rising sharply for the company.
For the 2011 fiscal year that ended Jan. 31, Pandora generated $137.8 million in sales and lost $11 million. Sales more than doubled and jumped 150 percent compared with the 2010 fiscal year, when Pandora lost $24.9 million.
Pandora captures more than 50 percent of all Internet radio traffic within the top 20 broadcasters measured by Triton Digital Streaming.
The company features what is dubbed a "music genome project." Through the music genome, Pandora offers a customized radio experience on its platform that allows users to develop their own playlists.
"Pandora's key strengths are its commanding market share of the Internet streaming radio audience, its rich display advertising formats, and its algorithm-based music genome," which presents a unique and customized user experience," Anupam Palit, an analyst with New York City-based Greencrest Capital, said in a research note.
Still, plenty of foes lurk. Several startups are competing directly in Internet radio services. Among them: San Francisco-based Rdio, San Diego-based Slacker and two London-based firms, Spotify and Last.fm.
"Competition is a threat," said Matt Therian, an analyst with Renaissance Capital, which tracks the IPO market. "But if Pandora can get to scale, they can be large enough to stop their rivals."
Amazon, for example, is always vulnerable to other services that allow consumers to buy books and other products online. However, Amazon's bulk and reach help it ward off the competition.
Pandora seems to be prepared for significant growth and is busy trying to hire more workers.
At the end of April, Pandora had 359 employees, most of them in Oakland. On its website Wednesday, the company had openings to hire 45 employees, including 34 in Oakland.
"Pandora does have a track record of growing revenue," Therian said. "They have already ramped up revenue into the $200-million-a-year run rate. This is not like the dot-coms from 1999 or 2000. This is a company with a solid track record."
Contact George Avalos at 925-977-8477. Follow him at Twitter.com/george_avalos.