Pandora Stock Bumps into a Growth Barrier
Pandora Media Inc (NYSE:P) stock lost about five percent, to close at $12.18 on Tuesday. Investors have been hugely disappointed by the company’s third-quarter results, and Pandora stock is likely to go down further.
Pandora lowered its annual guidance, as the number of its active listeners declined. The number of its active listeners stands at 77.9 million in the third quarter, as compared to 78.1 million last year. Pandora stock has guidance for revenues between $1.35 billion and $1.37 billion for the year, which is lower than the earlier guidance of $1.39 billion and $1.41 billion. (Source: “Pandora Reports Q3 2016 Financial Results,” Pandora Media Inc, October 25, 2016.)
The music streaming company could not beat expectations on its quarterly results on Tuesday, and it reported a loss of $0.07 per share, as against the estimate of $0.06 a share. It also could not meet its top-line expectations, posting revenues of $352.0 million compared to an estimated $366.0 million.
Advertising sales constituted the bulk of Pandora’s revenue, and it rose seven percent to $273.7 million. Its ticketing service revenue was $22.1 million, which grew at 25% year-over-year. Pandora’s subscription and other revenue was $56.1 million, a decline of one percent.
Pandora CEO Tim Westergren said, “Pandora’s transformation continues with the launch of compelling new products and partnerships that open up significant revenue streams.”
To compete with Spotify AB and Apple Inc.’s (NASDAQ:AAPL) “Apple Music,” the Internet radio company had acquired Ticketfly, LLC for about $450.0 million last year. Through this ticketing and digital marketing company, Pandora listeners can find live music events and buy concert tickets.
The quarter results do not bode well for P stock, and the company is under pressure to prove that its strategies are working. Last month, the company had launched “Pandora Plus,” a new version of its ad-free radio service. Its licensing deals with major record companies were seen as a step in the right direction. Early in the month, Goldman Sachs Group Inc (NYSE:GS) had upgraded P stock to “conviction buy” from “buy,” while boosting its price target on the stock to $19.00 from $17.00.
Investors are looking forward to the release of Pandora’s on-demand subscription service later this year. Analysts have been bullish on the potential of this subscription service and they have seen potential upside for premium radio service. However, with the decline in active listeners and lowering of guidance, confidence is shaken and Pandora stock may struggle.