Pandora Media Inc (P) EPS Slips, but Beats Sales

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Internet music service Pandora (P) posted earnings results after the closing bell on Thursday, with mixed results overall. Earnings per share (before non-recurring items) came in at $0.00, whereas analysts had expected a 1-cent gain. Revenues, however, reached $182 million in the October-ended Q3, above the expected $177 million.

Because smallish companies like Pandora are still looking for big growth, revenue numbers are a bit more important than earnings per share at this stage. And Pandora has indeed demonstrated strong growth with revenues up 50% year-over-year and mobile advertising going up 58% compared to the October quarter a year ago. These types of gaudy figures help explain Pandora shares having gained 223% year-to-date.

That said, the company’s Q3 performance was not as outstanding as its Q2 was, when it posted revenues +58% and mobile revenues +92%. In fact, total mobile revenues have actually come down a bit sequentially, from $116 million last quarter to $105 million this quarter. Yet because Pandora competes against actual radio stations, another positive is its share of overall radio listening in the U.S. is now up to 8.1%, an increase from 6.6% a year ago.

Can Pandora keep taking big hunks of market share for the forseeable future? If so, will it be able to successfully monetize its new and more regular users? In this way, Pandora seems to share a similar balancing act as Facebook (FB) does, increasing the profits from its service without decreasing the quality of the user’s experience with too many ads. Pandora has a subscription service, too (as doesSIRIUS XM [SIRI])… but then again, regular radio does not.

Analysts have had a mixed impression regarding earnings expectations for this quarter and next, as well as both fiscal 2014 and 2015. This has earned the company a Zacks Rank #3 (Hold) and a longer-term Neutral stance. Guidance from the company for its Q4 revenues is in line with consensus expectations.

Pandora stock was modestly up in day trading before the earnings report, and it’s basically given back those gains thus far in the after-market. It must be tough to keep climbing when you’re already up 200+% on the year, especially when there’s no price-to-earnings multiple to calculate.

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