Pandora Media released its latest earnings report after closing bell last night, posting adjusted losses of 24 cents per share on $316 million in revenue. Wall Street had been looking for losses of 34 cents per share on $318.4 million in revenue. In the year-ago quarter, the streaming radio service provider reported $297.3 million in revenue and adjusted losses of 20 cents per share.
Interestingly, some analysts cut their price targets for Pandora Media stock, while others increased theirs and still others left their targets the same.
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Pandora Media’s revenues miss in most segments
Pandora’s GAAP losses per share came in at 56 cents per share versus the year-ago quarter’s net loss of 51 cents per share. Adjusted EBITDA losses widened to $71.3 million from the year-ago quarter’s adjusted EBITDA loss of $57.4 million. The consensus stood at adjusted EBITDA losses of $73.3 million. Ad revenue amounted to $223.3 million, versus the consensus of $226.9 million, while subscription services and other revenue was $64.9 million, compared to the consensus of $66 million. Ticketing revenue beat expectations, however, coming in at $27.8 million versus the consensus of $25.5 million.
Pandora Media ended the first quarter with 76.6 million active listeners, which missed the consensus of 80.1 million. The company lost 4.3 million listeners, although consensus was only expecting it to lose 900,000 listeners.
Pandora Media’s premium model showing early positives
Some analysts feel that last night’s earnings release demonstrated a shred of hope for Pandora’s premium subscription model. Canaccord Genuity analyst Michael Graham reiterated his Buy rating and $18 price target on the company’s stock following last night’s earnings results. He described ad RPMs as “robust” and said they made up for the lower listening hours.
He noted that Pandora had 1.3 million new subscription trials within the last seven weeks, of which 500,000 of them were premium subscriptions. He feels that this “seems like a big number” because the company’s core target audience consists of only 4.7 million Plus subscribers. Pandora management said last night that a little over half of the eligible listeners were offered opportunities to upgrade and added that it requires several hits to get a trial going. However, he is upbeat on the progress so far.
Ad RPM came in at $50.87, which was almost $4 more than what Graham had been expecting. He feels this is mostly the result of restricting hours for lower-RPM listeners without there being any big impact on ad revenue. However, he also partially attributes this to higher display inventory yields as a result of progress in programming.
Pandora secures funding from KKR
Wedbush analyst Michael Pachter is also positive on the company’s progress toward its three-tiered subscription model, although he expects it to keep generating losses. He added that the new financing from KKR should allow it to keep losing money for now while it ramps subscriptions. KKR agreed to pay $150 million for 7.5% convertible preferred shares with a strike price of $13.50. As part of the agreement, the fund also will have a presence on the company’s board.
Pachter believes Pandora will be able to convert at least 1 million current Plus subscribers to the new on-demand subscription model and pull in another 1 million to 2 million net new U.S. on-demand subscribers by the end of next year while up-selling customers from its ad-supported service to the Plus offering.
Pandora Media’s guidance disappoints
Goldman Sachs analysts boosted their price target on Pandora to $18 per share as a result of last night’s report. However, not everyone was so upbeat on the company’s results, as Susquehanna analysts cut their price target to $12 per share and Cowen analysts reduced their price target to $8 per share.
Pandora Media has said it expects to become profitable this year, although this is a topic of debate among analysts. Many are concerned about competition in the streaming music industry, which continues to heat up thanks to rivals like Spotify and Apple Music.
Shares of Pandora Media were down 4.09% to $9.96, although they did fall as low as $9.41 during regular trading hours on Tuesday.