Pandora Media, Inc. (P) shares fell 3.5% on Tuesday following Spotify Technology S.A.'s (SPOT) successful debut on the New York Stock Exchange. Spotify is the world's leading music-streaming service with 71 million paying subscribers, which is about twice as many as its nearest competitor Apple Inc. (AAPL). Pandora is the ninth largest service by subscribers, behind companies such as Amazon.com, Inc. (AMZN) and Alphabet Inc. (GOOGL).
While a better-funded Spotify is concerning, Pandora's $145 million acquisition of AdsWizz should help take the pressure off of quarterly user trends, according to Raymond James analysts. The firm upgraded Pandora stock to a Strong Buy with a price target of $8.00 per share late last month, saying that the AdsWizz acquisition mirrors Google's purchase of DoubleClick in creating a platform that brings publishers and advertisers together to monetize content. (See also: Can Apple, Amazon, Pandora Compete With Spotify?)
From a technical standpoint, Pandora stock broke down from the 50-day moving average at $4.81 following Spotify's listing on the NYSE but regained much of that ground early Wednesday. The relative strength index (RSI) appears neutral at 46.37, while the moving average convergence divergence (MACD) remains in a sideways trend. These indicators suggest that traders remain uncertain about the company's future direction.
Traders should watch for a move lower to test trendline and S1 support levels at $4.29 on the downside. A further breakdown from these levels could lead to a move to S2 support at $3.54. If the stock rebounds from these levels, traders should watch for a move to upper trendline resistance at around $5.40. A breakout from these levels could lead to a move to R1 resistance at $5.66 or R2 resistance at $6.29. (For more, see: Spotify Stock Offers 'Netflix-Like Promise'.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.