Stock markets have had a great run in 2013, but shares of Live Nation and Pandora have fared even better. Live Nation shares are up 46% this year. Pandora shares are up an incredible 78%.
 
Some of the companies' gains can be attributed to the rise in the broader markets. The composite for New York Stock Exchange, where Live Nation trades, is up about 13% this year The Nasdaq, where Pandora trades, is up over 14% this year. The Dow and S&P 500 both closed at all-time highs Tuesday. The Federal Reserve's quantitative easing may not have turned around the country's employment, but interest rates are low and stocks are soaring.
 
A good portion of both company's gain probably comes from the rise in their sectors. Neither Live Nation nor Pandora is exactly like a multi-faceted media company such as News Corp, but both have business models that either acquires (Live Nation) or licenses (Pandora) content. Media companies that create, buy and license content have been on a tear this year. Viacom is up 32%, News Corp is up 31% and Time Warner is up 27%. SiriusXM Radio, which also licenses much of its content, is up 22%.
 
Live Nation's gain reflects the state of the concert industry and its growth in recent years. The weak summer of 2010 concert season is in the industry's rear-view mirror. The economy is in a better situation and people are attending live events. (Case in point: Madison Square Garden Company shares are up 33% this year.) Live Nation is also a larger company than it was a year or two ago. Acquisitions of promoters, such as this year's deals for EDM promoters HARD Events and Insomniac, show Live Nation has filled gaps in its business. Acquisitions of ticketing companies (Spain's ServiCaixa in 2011, France's Ticketnet in 2010) show the company has added to its profitable ticketing operation.
 
A valuation often comes down to the cash, and Live Nation generates significant free cash flow even though its income statement may not show a net profit. The company had free cash flow of $14 million in the first quarter of 2013 and $276 million in calendar year 2012. Wednesday's closing price of $13.57 values Live Nation at $2.64 billion.
 
Pandora is on a roll ahead of its earnings release Thursday. Nearly two years had passed since Pandora shares had been over its $16 IPO price. Its shares closed Wednesday at $16.48 (valuing the company at $2.84 billion) and last week reached a 52-week high of $17.16. These high marks are all the more remarkable given Pandora's share price reached a low of $7.08 in November and after steadily falling -- with occasional rebounds -- since the IPO in 2011.

Other than broader market forces, two additional factors stand out in Pandora’s recent rise. First is the company’s announcement of its integration of two media-buying platforms, Mediaocean and STRATA, with proprietary software that combines planning, buying and billing under one system. This should help Pandora's advertising revenue. Second is the company’s apparent success with its recent cap on mobile listening to better manage costs related to listeners' mobile usage. Listener hours in April dropped from the previous month but active users increased. The result was a lower royalty bill without a coinciding loss of listeners. The company has not revealed specifics about the cap's impact on paid subscriptions but should reveal more during Thursday's earnings call.
 
Some Pandora critics point to the company’s inability to turn a profit since going public, but some equity analysts see an improving situation. This week Barclays raised its price target to $17 from $10 and Wedbush raised its price target to $15 from $11.50. Last week Piper Jaffray upgraded the stock to $20 from $17. Not all analyst notes have been positive, however. Last week MKM Partners initiated coverage of Pandora with a “sell” rating and a $10 price target.
 
One thing that is sure to slow down Pandora -- to some degree -- is the launch of Apple's Internet radio service later this year. Reasoning that Apple will take away listeners or slow its growth, investors always flee Pandora when a report updates the status of the service. But investors should recognize that Pandora has continually grown as competition has increased over the years. And perhaps the fact that Apple is following Pandora into the Internet radio market says something positive about Pandora's business in the first place.