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Pandora (P) Q4 Loss Narrower than Expected, Revenues Beat

Pandora Media, Inc. (P) posted narrower-than-expected adjusted loss per share (including stock-based compensation but excluding one-time items) of 27 cents per share for the fourth quarter of 2016. The Zacks Consensus Estimate was pegged at a loss of 36 cents.

Revenues increased 16.8% year over year to $392.6 million, ahead of the Zacks Consensus Estimate of $375.4 million.

Pandora Media Inc. - Earnings Surprise | FindTheBest

Quarter Details

Revenue growth in the quarter was driven by higher advertising revenues (79.8% of total revenues), which increased 16.5% from the year-ago quarter to $ 313.3 million. Subscription service and other revenues (15.2%) increased 5% year over year to approximately $59.8 million. Revenues from ticketing services (4.9%) grew 91% to about $19.4 million.

Total listener hours, however, grew 0.2% on a year-over-year basis to 5.38 billion in the fourth quarter but number of active listeners fell to 81 million from 81.1 million of the prior-year quarter.

Average revenue per paid subscriber (ARPU) was $4.73 in the quarter and Licensing costs per paid subscriber (LPU) was $3.12.

Pandora's adjusted EBITDA loss was $30.4 million as against a profit of $24.8 million in the year-ago quarter.

Pandora Media, Inc. Price, Consensus and EPS Surprise

Pandora Media, Inc. Price, Consensus and EPS Surprise | Pandora Media, Inc. Quote

Balance Sheet & Cash Flow

Pandora exited the quarter with $243.3 million in cash and investments, down from $264 million at the end of the last quarter. However, cash used in operating activities was $2.6 million in the quarter compared with $71 million in the prior-year quarter.

Guidance

Pandora also provided guidance for the first quarter and for full year 2017.

For the first quarter of 2017, revenues are expected in a range of $310 million to $320 million. The company expects adjusted EBITDA loss in a range of $80 million to $70 million,

For 2017, revenues are forecast in a range of $1.55 billion to $1.70 billion. However, the company failed to provide the outlook for adjusted EBITDA for full year 2017,

Moreover, the Zacks Consensus Estimate for revenues for 2017 stands at $1.69 billion and the earnings per share is pegged at loss of $1.13.

Our Take

Pandora has taken strategic measures to post a turnaround. In the past few months, the company announced Pandora Plus and Pandora Premium services. While Plus is a "one-of-a-kind, ad-free radio experience" available for $4.99 per month, Premium creates a playlist for users based on their playlist history. It will be ad free and will enable users to save songs for offline listening. Premium carries a price tag of $10. At the end of December, Pandora Plus had 375,000 users.

Also, as part of its strategy, Pandora acquired companies like Next Big Sound, Rdio and Ticketfly. In addition, it is cutting label deals to reduce dependence on CRB rates and better manage its content costs. It has struck several licensing deals with Sony Music, Warner Brothers, a unit of Time Warner TWX and Universal Music Group. Pandora also announced a 7% cut in its workforce.

Though these initiatives appear to be headed in the right direction, analysts observe stiffening competition as a very powerful threat. Pandora's entry has been pretty late in the on-demand music services arena, which boasts big names like Spotify and Apple.

In fact, Apple Music has seen phenomenal growth. Within a year and half of its existence, reportedly, Apple Music now has over 20 million paid subscribers. It is inching closer to Spotify's 40 million paid subscribers. Apple Music's collaborations with popular music artists like Taylor Swift and others have been widely considered by analysts as the key to its success.

Pandora carries a Zacks Rank #3 (Hold).

We also note that Pandora's shares have gained a decent 35.42% in the past one year, outperforming the Zacks categorized Internet Services industry, which gained 18.31%.

Better-ranked stocks in the broader tech space are Jabil Circuit Inc. JBL and Oclaro Inc. OCLR . While Jabil sports a Zacks Rank #1 (Strong Buy), Oclaro carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

In the trailing four quarters, Jabil and Oclaro delivered an average positive earnings surprise of 45.61% and 75% respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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