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Pandora: Buy or Sell on Apple Dip?

Pandora shares have taken a hit in the past few days amid buzz that Apple is moving towards a streaming ad-supported music service. They're now down 45 percent for the year. So, does that make Pandora a "buy" now?

Source: Pandora

JP Morgan's Doug Anmuth recommends buying in this weakness, saying "we continue to view Pandora as a compelling play on mobile advertising and believe monetization will improve materially over the next few quarters as: 1) usage growth remains strong; 2) radio advertiser buyside platform integration should be in place by fiscal year-end; and 3) Pandora continues to build out its sales force in major markets.

(Read More: Apple Moves to Launch Web Service, Pandora Plummets.)

JMP Securities reiterated its "market outperform" rating and $16 target price, saying that Apple's threat is "overblown and fully priced in."

SunTrust Robinson Humphrey issued a note reiterating its "buy" rating, noting that Apple is likely to come out with a service that competes more with Spotify than with Pandora's ad-supported radio experience, noting that "Apple doesn't have a local sales force."

(Read More: Pandora Well Positioned for Mobile Growth: CEO.)

But other analysts are still negative. Piper Jaffray issued a note titled: "When Elephants Fight, Ants Die First: Why Pandora Should Worry." Analyst James Marsh raised concerns about Pandora's lack of exclusive content as it "is battling to get its music costs under control." And Nomura, with a "reduce" rating and $8.50 price target warned "we do not believe that the company's competitive trenches are deep enough to prevent new competitors from threatening Pandora and disrupting its user growth." Apple, Nomura says, is a particular threat with its "cash firepower" and existing relationships with music labels.

And BTIG analyst Rich Greenfield, who has a "sell" on Pandora, warned about the potential impact of an iRadio product in a note back on October 3rd. He wrote on Friday "Controlling the mobile operating system, which is with consumers everywhere they go is a critical advantage held by both Apple and Google."

Sources say Apple is aiming to launch its free music service around the Grammys on Feb. 10.

(Read More: Apple Deserves $1,100 Price Tag: Pro.)

—By CNBC's Julia Boorstin
@JBoorstin

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.