Pandora Media Inc (NYSE:P) reported its third quarter earnings after the bell on Tuesday and it wasn’t exactly full of beautiful music.
In positive news, for the quarter, the company saw an adjusted profit of five cents per share, which exceeded analysts’ estimates. Revenue increased 60% from the previous year to $120 million with its mobile revenue having even better numbers: year-over-year it incurred a 112 percent rise to $73.9 million in the third quarter.
Pandora said its total listener hours jumped 67% year-over-year to 3.56 billion during the last quarter and active users also increased 47% to 59.2 million from the previous year.
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CEO Joe Kennedy said in the company’s earnings release, “This quarter exceeded our expectations as we monetized mobile at record levels and grew total mobile revenue 112%. During the quarter we launched Pandora 4.0, the biggest redesign on the iOS and Android platforms ever, bringing new, innovative and enhanced functionality to mobile devices for the first time for both users and advertisers.”
But the picture gets ugly with fourth quarter numbers.
Pandora Media Inc (NYSE:P) gave fourth-quarter earnings and revenue guidance that came in lower than analysts’ expectations; it forecast an adjusted loss between 6 cents to 9 cents per share for the quarter with revenue expected in the $120 million to $123 million range.
Analysts had anticipated a 1 cent per share fourth quarter profit on $130 million in revenue.
Market participants didn’t like the figures and responded with a 22% share drop to $7.40 during after-hours trading.
Pandora went public in 2011 and has faced recent challenges with higher costs as it tries to increase its listening audience. The company had hoped to benefit from a move in radio from traditional broadcasts to a digital format; the company does hold a strong position in this arena.
But with user growth has come greater royalty fees each time a song is played for a user.
The company’s shares have taken a hit in recent months. Year-to-date, it is down 5.59 even with the recent reports that Apple Inc. (NASDAQ: AAPL) is moving toward its own Internet radio service with advertisements. This type of product could poke at the core of Pandora’s top streaming business but in September, it provided an opportunity for Pandora shares to be a good buy.
We wrote the following based on a BMO research report:
The analysis sees Apple Inc. (NASDAQ:AAPL) Radio as a significant competitor, but is of the view that Pandora Media Inc (NYSE:P) still has enough mettle to contest such a launch, and eventually the stock will rise up. If shares are bought right now, investors could have a lucrative opportunity here.
It’s probably too early to count Pandora out but Tuesday’s earnings report has followed a 2012 full of poor quarterly news.