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Will Pandora survive despite Apple's iTunes Radio?

Opening Pandora's box

Pandora Media shares slumped more than 3 percent before noon Friday, following a solid rally in the days leading up to the launch of a new competitor: Apple's iTunes Radio.

While it's clear iTunes Radio, which was released Wednesday, poses a risk to music streaming pioneer Pandora, stock analysts told CNBC they believe there's room for both in the market.

"Three to four big companies will own this space," said Rich Tullo, director of research at Albert Fried. "One is going to be Apple, one is going to be Pandora, one is going to be Spotify or whoever buys it and that's about it."

By his calculations, the streaming music business is currently worth roughly $25 billion. Pandora enjoys a 70 percent market share, too, said Lazard Capital Markets' Barton Crockett. It also boasts approximately 70 million active users, who play roughly 20 hours of music per month on average, according to Triton Digital.

The Internet radio company has an established presence in the United States, Australia and New Zealand, but has plans for further international expansion.

(Read more: Is Apple's iRadio a Pandora killer?)

Patrick Fallon | Bloomberg | Getty Images

Apple is left playing catch-up, then, Tullo said. While Pandora and rival Spotify have first-mover advantage, Tullo noted Apple seems to have the backing of artists and songwriters alike. After all, artists get a percentage of revenue of songs played on iTunes Radio.

"So if you're Pink Floyd, they're going to tell their fans to listen to their songs on radio on iTunes Radio over Pandora," Tullo said.

Pandora may have an advantage with advertisers, however, because it airs eight to 10 minutes of ads in an hour, Crockett said.

As a service, though, Crockett said Pandora has an edge with its Music Genome Project, a human-built algorithm encoding millions of songs incorporating a few hundred attributes including tempo, core progression, that combined go further than just a catalog.

"Apple doesn't have that human touch," he added.

Then again, Crockett said Apple has the power of its massive brand and loyal followers.

If Pandora is to survive the threat of iTunes Radio, though, does that make its stock any more attractive?

Both Crockett and Tullo maintain a "netural" rating on Pandora's stock right now.

"I'm not sure this is the best entry point on the stock," Crockett said of Pandora, which is up nearly 200 percent year-to-date. "It's too quick to say they're dead, but it's a good time to sit back and say 'should I buy the stock?' I say no."

—By CNBC's Katy Byron. Follow her on Twitter @kbyronCNBC