Does Pandora's CEO Swap Matter?

Shares of Pandora Media Inc (NYSE: P) fell more than 12 percent, a sign that investors don't seem to be delighted on the return of founder Tim Westergren as CEO in place of Brian McAndrews, who is leaving the company.

"We see the founder's return as a tacit admission that Pandora continues to face meaningful challenges in the online music space," Axiom Capital analyst Victor Anthony wrote in a note.

Anthony, who maintained his Hold rating and $10 price target on Pandora, said the company faces high execution risks to build out an on-demand, interactive service, to expand internationally, and to expand its live ticketing service.

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The analyst added that competition continues to grow. Spotify recently announced surpassing 30 million subscribers, Apple Inc. (NASDAQ: AAPL) Music in its short existence has over 11 million subscribers. In addition, Tidal is getting aggressive in the space with exclusive content, and YouTube/Google Play is becoming increasingly relevant in addition to launching the YouTube Red service.

"The rising prominence of these competing online music services should continue to pressure user and listener hour growth and challenge Pandora's ability to accelerate advertising growth," Anthony said.

On the acquisition front, the analyst said he is hard-pressed to see who would buy Pandora given that Apple, Alphabet Inc (NASDAQ: GOOGL), and Amazon.com, Inc. (NASDAQ: AMZN) have already built out their own services.

However, Anthony noted it could be the founder's return is an admission that the bankers (per New York Times) have failed to find a buyer.