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Apple's music announcement hits Pandora... again

Here's a trade you can take to the bank: Any hint of an Apple music service and Pandora shares get pummeled.

On Monday, after Apple introduced a $9.99-a-month subscription service called Apple Music, Pandora shares sank 3.8 percent to their lowest in over a month.

It's all very familiar. Pandora's stock has seen numerous plunges since 2012, many in the double-digits, either because of reports that Apple is getting aggressive in streaming or because it actually comes out with something new.

The reasons are pretty obvious. Pandora needs iPhone and Android users to choose its online music service over rival offerings. The more robust Apple's homegrown music product, the thinking goes, the less likely iPhone users are to select a third party app.

Pandora's post-WWDC drop

And with Apple holding $194 billion in cash, Pandora's sub-$4 billion stock market value would seem to carry little resistance to the iPhone maker's never-ending ability to spend on marketing and product development.

But here's the thing. In Pandora's decade on the market, the company has grown through every previous Apple threat, even the ones that were supposed to sink it.

Most notably, in September 2013, Apple rolled out iTunes Radio, an ad-based challenger to Pandora. When rumors of a pending announcement were reported in early June, Pandora's stock sank 15 percent in two days.

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Yet after a brief dip in listeners, Pandora (and the stock) recouped its losses. To this day, monthly active users and engagement continue to increase, with 79.2 million people now listening for 22.3 hours per month.

By Pandora's estimate, the service reached 10 percent of all U.S. radio listening in March for the first time ever. Creating a personalized experience that satisfies music lovers and keeps them coming back has proven to be challenging for newer entrants, big and small.

"It's a fantastically hard thing to do," said Pandora founder Tim Westergren, in an interview on Monday. "New products generate a lot of trials, but the real test is sustained listening."

At Apple's Worldwide Developers Conference on Monday, the company said its new service would blend radio, a hand-picked music experience from experts and a social network of sorts to help artists communicate with fans.

Apple Music is wrapping in Beats, making use of the $3 billion acquisition from 2014 that was a head-scratcher for many analysts. Beats 1 will bring listeners broadcasts from cities around the globe along with curation.

The subscription model more closely resembles Spotify's on-demand service than Pandora's ad-supported model, but Spotify isn't publicly traded.

Following the announcement, Spotify CEO Daniel Ek tweeted and then apparently deleted these two words: "Oh ok." Social media pundits were left to guess at what he meant, or didn't mean.

Read MoreSpotify CEO deletes tweet

Pandora, Spotify and Apple are just three of the many digital music options. Others include Amazon.com, Rdio, TuneIn and Slacker. Pandora has been beating back competition for 10 years.

"It's not like this service has never seen interesting alternative solutions before," said Mark Mahaney, an analyst at RBC Capital Markets. "At some level, you have to say that Pandora is fundamentally immunized against other services."

Mahaney recommends buying Pandora shares and has a $25 price target, representing a 41 percent increase over Monday's closing price of $17.69.

Pandora is by no means in the clear. Because of the Oakland, California-based company's royalty structure and its agreement with the music industry, more than half of its revenue goes toward content acquisition costs. That's a hefty hit to absorb, and resulted in a $28.9 million first-quarter net loss.

In the risks section of its annual report, Pandora spells out the business challenges of building for mobile operating systems run by companies that are also rivals.

"Some of these mobile device makers, including Apple, are now, or may in the future become, competitors of ours, and could stop allowing or supporting access to our service through their products for competitive reasons," the filing says.

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It's also a rather volatile stock, plunging 31 percent over the past year, while major Internet tech companies like Facebook, Amazon, Microsoft and Apple have rallied.

But if you're betting that Pandora will wilt in the face of yet another music upgrade from a tech giant, Westergren has the same message he's had for years: "We're patient."