Shares in Pandora Media took off this afternoon within minutes of a report in the New York Times suggesting that the world’s largest Internet radio provider is looking for a buyer.
Pandora is up nearly 9%
Following a piece in The New York Time’s Dealb%k penned by Leslie Picker and Ben Sisario this afternoon, shares in Pandora have spiked dramatically.
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The two reported wrote that according to sources briefed on the talks, Pandora is considered selling itself and is working with Morgan Stanley to help find it potential buyers. While this afternoon’s piece quotes anonymous sources close to the deal, those same sources said the talks are still in a preliminary stage and may go no further.
While the company does have the largest amount of streaming customers, it also has a healthy amount of competition including Apple Music, Spotify and a host of others. As a result, the company’s stock has a market value of $1.8 billion compared to $7 billion to years ago. More importantly, certainly for investors, is that the stock has dropped over 60% in just the last five months.
Pandora is primed to announce both its fourth-quarter and full-year earnings at the end of market close today and anything less than rosy might see this afternoon’s gains evaporated quite quickly. At the end of 2014, Pandora announced that it had 81.5 million users, the number that was also its peak. In the last quarter of this year (2015), the service could claim only 78.1 million users.
The company is calling for its adjusted full-year earnings to run between $51 million and $56 million for the compared to its third quarter guidance which called for earnings between $75 and $85 million.
Consensus analyst estimates (S&P) are calling for $1.2 billion in revenue for 2015 which would be a 27% percent gain from 2014. Unfortunately for Pandora that would mark its all-time slowest growth numbers.
Fewer users, higher royalties
A panel of federal judges recently increased the amount of money that the radio provider and other Internet radio providers would have to pay to record companies. While this might sound bad, investors were pleased as the increase was considerably less than what Pandora was expecting to have to shell out in royalties.
Neither Pandora or Morgan Stanley have commented on the story but it brought an immediate rise in Pandora shares. Pandora closed Wednesday at $8.40 but opened today at $8.10 ahead of today’s earnings call. However, the stock has climbed to $8.99 (2:50 EST) for a gain of 7.02%.
That gain came at the same time as the NYT ran its story. At one point following the news the stock had reached $9.68.