Pandora Media Inc. shares fell Monday after Apple Inc. reported a strong response to its new radio service.
THE SPARK: Apple said Monday that more than 11 million listeners have already tuned in to its iTunes Radio service in the first few days since its debut. The music service comes with new iPhones and the free iOS 7 mobile operating system update, both of which hit the market Friday.
THE BIG PICTURE: Pandora provides a popular Internet radio service that faces growing competition.
Apple already had significant reach through its brand popularity. The company said Monday that shoppers snapped up 9 million of its newest iPhones and that demand exceeded supply. Any users of existing iPhones who updated their operating system since then will also have access to the music service.
THE ANALYSIS: Stifel analysts Jordan Rohan and Michael Purcell said that investors had ignored the threat of intensifying competition to Pandora until this morning. They noted that Apple got 11 million users with no promotion and tens of millions of people still have yet to upgrade to the new operating system.
The analysts said the ultimate effect on Pandora is unclear. They don't know how long users are listening to iRadio, for example. But they expects that Apple's entry into streaming radio will cut Pandora's listening hours by 10 to 15 percent over the next four to six months.
Still, the analysts said that they are still optimistic about the company over the long term and believe in its new CEO, Brian McAndrews. Rohan and Purcell have a "Hold" rating on Pandora's stock.
SHARE ACTION: Shares fell $2.70, a 10 percent, to $24.29 by late afternoon. Its stock has traded between $7.08 and $27.50 in the past 52 weeks.