Back to top

Image: Bigstock

Is a Beat in Store for Pandora (P) this Earnings Season?

Read MoreHide Full Article

We expect Pandora Media Inc to beat expectations when it reports second-quarter 2017 results on Jul 31.

Why a Likely Positive Surprise?

Our proven model shows that Pandora is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Pandora’s Earnings ESP is +17.95%. This is because the company’s Most Accurate estimate is pegged at a loss of 32 cents while the Zacks Consensus Estimate is pegged higher at a loss of 39 cents. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pandora currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Pandora’s Zacks Rank #3 and +17.95% ESP makes us reasonably optimistic of a positive surprise.

Factors to Consider

Pandora reported narrower-than-expected loss in first-quarter 2017, delivering a positive surprise of 26%. Moreover, over the trailing four quarters, the company pulled off an average positive earnings surprise of 18.46%.

However, the company has underperformed the industry on a year-to-date basis. While the industry gained 20.8%, Pandora lost 25.2% over the same time frame.



We believe the company’s strategic measures to boost its performance are taking shape. During the past month, the company witnessed a lot of changes. The $150 million investment commitment from private equity firm KKR was replaced with an investment of $480 million from SiriusXM, in exchange of series A convertible preferred stock, representing 19% of the outstanding shares of Pandora. Per the deal, Sirius will get three board positions and will also get the liberty to elect the board’s next chairman.

Moreover, at the end of the quarter, there was some restructuring in management roles as well. The company announced that CEO, Tim Westergren, has stepped down from his role and will no longer serve as a board member. CFO Naveen Chopra will serve as the interim CEO. Apart from Westergren, the company announced the departure of President, Mike Herring and CMO, Nick Bartle. Pandora also inducted Jason Hirschhorn, the CEO of a digital content startup called ReDEF Group to the company’s board.

Pandora also signed an agreement with Eventbrite to sell its loss-making subsidiary, Ticketfly for $200 million on Jun 9. Additionally, toward the end of the month, the company announced its exit from Australia and New Zealand, so that it can better focus on the services available in the US market. This is a positive for the company as it will enable it to focus more on its core operations.

Stocks to Consider

Here are some of the companies apart from Pandora which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Kemet Corporation (KEM - Free Report) , with an Earnings ESP of +11.1% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five9, Inc. (FIVN - Free Report) with an Earnings ESP of +10.0% and a Zacks Rank #2.

CGI Group, Inc. (GIB - Free Report) with an Earnings ESP of +5.71% and a Zacks Rank #2.

More Stock News: Tech Opportunity Worth $386 Billion in 2017
                
From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.

Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential.

See these stocks now>>
 

Published in