Originally launched in 2000,
Pandora Media ( is often referred to as an Internet radio pioneer. Its technology has helped it lead the free online music listening movement. With Pandora, a listener can enter a single song, artist, or genre to start a station, and its mathematical algorithms will combine with individual and collective feedback to suggest songs and build personalized playlists. P - Free Report)
Pandora offers its users a free, ad-supported version, as well as Pandora Premium, a $9.99 per month subscription that lets you play and choose any song or album and utilize playlist creation features.
Sitting at a Zacks Rank #5 (Strong Sell), Pandora reported mixed fourth-quarter results, but the company has been on a steady decline for a few years now. Is there any chance for a rebound for this Internet radio innovator?
Q4 Earnings: A Deep Dive
Last week, Pandora reported an adjusted loss per share of 21 cents, missing the Zacks Consensus of a loss of 7 cents and falling short of the year-ago quarter’s loss of 13 cents per share as well.
Revenues grew just 0.7% to $395 million, which beat our consensus estimate of $375 million. If you exclude sales from Ticketfly and the recent winding down of operations in Australia and New Zealand, sales would have climbed 7%.
Subscription and other revenues increased as well, up 63.2% year-over-year thanks to subscriber growth and higher average revenue per paid subscriber (ARPU).
ARPU was $6.08, up 32.8% from the year-ago period; this metric was driven by growth in Pandora Premium subscribers.
However, advertising revenues fell 5% to $297.7 million, while total listener hours declined 6.5% on a year-over-year basis to 5.03 billion. The number of active listers also decreased, down 6% year-over-year to 74.7 million.
For the current quarter, one analyst cut their outlook in the last 30 days, and the consensus has dipped from $-0.25 to $-0.26. Earnings are expected to decline about 8.3% for this time period.
Three analysts have revised their estimates downward for the current fiscal year, though earnings are expected to grow over 51% in that time frame.
Looking at the next fiscal year, earnings could grow over 77%, but analysts have been slashing their outlook for this time period as well. And, the current consensus has dipped from $-0.04 to $-0.08 in the last 30 days.
What’s Next for Pandora?
Shares of Pandora are down nearly 11% so far this year, and have plummeted almost 67% in the past one year.
The company has no P/E since it is making no profit at the moment.
Despite its success in the world of online music, Pandora’s technology has been overshadowed by streaming services like Spotify and Apple’s (
AAPL - Free Report) Apple Music, especially as streaming becomes the preferred way to listen to music.
The company had a just awful past year on the stock market, but there are some bright spots in its management’s strategy, as well as a turnaround plan starting to see results.
Looking ahead, Pandora hopes the launch of Premium Access will boost subscriptions to its Premium service. And, expanded partnerships with Sonos, Comcast’s (
CMCSA - Free Report) Xfinity X1, Alphabet’s ( GOOGL - Free Report) Android TV, and Amazon’s ( AMZN - Free Report) Fire TV are also expected to drive results.
While the near-term is a little scary looking for the company, Pandora seems to be moving in the right direction, with growing subscription revenue, good management, and a solid path towards getting back to profitability.
For investors looking for an Internet Services stock with more potential right now, they should consider Akamai Technologies (
AKAM - Free Report) , a Zacks Rank #2 (Buy) stock that anticipates earnings growth of about 13.7% for its current fiscal year. Zacks Top 10 Stocks for 2018
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