Buy Pandora, Sell Zynga and Fire Its CEO
Now, on the rebound, I'm done giving Zynga (ZNGA) CEO Mark Pincus the benefit of the doubt.
Pincus sold the company's stock in a $12 per share secondary offering. Weeks later Zynga reported a pathetic quarter. Longs got fleeced. Pincus charged the shaver.
As employees from every rank jump ship at Zynga, the ones with the privilege of quitting to Pincus' face likely tell him, It's not me, it's you.
Investors who dumped the stock do not misunderstand Zynga. And folks who are furious with Pincus have a right to be. Whether he broke the law or not is irrelevant, however one thing's certain. On just about every level, Pincus goes down as 2012's most incompetent CEO.
Contrast the unacceptable scene at Zynga with the situation at Pandora (P) .
Earlier this year, I visited Pandora's Oakland headquarters. I was in the minority on Pandora; therefore, I had to go the extra mile vis-a-vis due diligence. I refused to rely solely on my instinct and standard research.
I came away from my chat with Pandora co-founder Tim Westergren more confident than ever in my long position.
Ever since Facebook's (FB) IPO blowup, pressure on social media stocks has intensified. Looking back, it's clear Zynga deserved the stereotype of social media loser. Not Pandora; it suffered guilt by association.
Before it became obvious, nobody gave Pandora credit for how well positioned it is in the broad new media and mobile spaces.
When I met with Westergren, he credited Steve Jobs's invention of Apple's (AAPL) iPhone with Pandora's raging success. Westergren and his team at Pandora saw the shift to mobile coming before the media and bearish Wall Street analysts a) started writing about it and b) incompetently misunderstood it.
Not only did Pandora understand the dynamics of mobile migration, it prepared for them. And, as Chairman and CEO Joe Kennedy explained on Wednesday's impressive earnings call, the interactive nature of Pandora as a visual and auditory platform provides display advertisers with more mobile real estate and audio spots with an already tuned-in audience. And, of course, Pandora can mix approaches across ad types and user platforms.
If you connected the dots on Pandora, faith has been rewarded.