Pandora Media Inc (NYSE:P) will report its second quarter earnings after the close on August 22nd. A report from JP Morgan by analysts Doug Anmuth, Diana R Kluger, Kaizad Gotla and Bo Nam expect the company to report strong results owing to the persistent momentum in mobile audio advertising and “early integration into radio buyside platforms.”Pandora

Mobile hours cap is working as per the expectations, limiting the content cost. This facilitates a higher investment in product development and sales force expansion while at the same time keeping check on the value of the inventory. Analysts believe “better monetization and moderating hours” will boost the Mobile advertising RPM.

Monetization and profitability to improve

For Pandora Media Inc (NYSE:P), monetization and profitability is expected to improve in the coming quarters. Analysts believe that post the mobile cap, Pandora’s market share, which is around 7 percent of total US radio, will continue to rise. Monetization and profitability will also rise as a result of radio buyside platform integration.

Pandora is also strengthening its local sales force and is now present in 28 of the top 40 markets. As discussed above, cap on mobile hour will limit the content costs, boosting both investment and profitability.

2Q estimates for Pandora

For the second quarter, analysts are expecting revenues of $158.2 million, which is an increase of 56 percent year over year. Consensus estimate for revenue is of $156.3 million and guidance provided is between $155 million to $160 million.

Strong performance of Mobile ads is expected to compensate for the dry run of Web advertising. According to report, total add revenues are expected to come in at $130.2 million, up 46 percent year over year. Mobile ad revenue is estimated at $93.7 million, a jump of 76 percent year over year while Web ad revenue is expected at $36.5 million increase of 1 percent year over year. Subscription revenue for Pandora Media Inc (NYSE:P) is modeled at $28.1 million up 136 percent year over year.

The report expects Mobile RPM to increase by 44 percent to $31.78. As a result of integration with the buyside platforms, Pandora is now being considered for a broad range of advertising buys. Analysts expect EBITDA of $8.8 million and PF EPS of $0.03, which is more than the consensus estimate.

Items to watch for

According to the report, items to watch for in the second quarter earnings call will be Mobile RPM growth, update on buyside platform integration, CEO search and salesforce, growth in subscription due to the cap on mobile hours, and increased investment in product development and sales and marketing.

 Analysts have an Overweight rating on Pandora Media Inc (NYSE:P) with a price target of $23.