This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Pandora Missed a Beat as SiriusXM Surged

In contrast, Pandora shares fell nearly 20% in after-hours trading on Monday, after the company beat third quarter earnings estimates, but cut its full year guidance sharply as a result of content costs and ad market headwinds.

The Oakland, California company said it's 2012 loss will be between 9 cents to 12 cents a share, nearly doubling previous estimates detailed in August. Pandora also cut its sales outlook to $422 million to $425 million from as much as $432 million, forecasted earlier in the year.

While subscribers grew 85% in the quarter and mobile ad sales rose over 100, those figures weren't enough to offset content costs. Royalties paid to music labels now represent 55% of the company's revenue and continue to hinder Pandora's overall profitability. Royalty costs and uncertain ad revenue create an uncertain financial piscture for the company headed into 2013.

Yesterday's earnings didn't help. BTIG analyst Richard Greenfield took to Twitter to complain that Pandora wouldn't take analyst questions on its conference call Monday evening. "Pandora management chooses not to take our questions on their quarterly earnings call," wrote Greenfield on Twitter. He characterized the lack of a Q&A as 'frustrating."

"[Despite] the incrementally positive underlying fundamentals showing mobile revenue growth in excess of content cost growth, [Pandora] shares are likely range bound until the new year," wrote Credit Suisse analyst Stephen Ju, of Pandora's third quarter and lowered guidance.

Pandora did show some positives in third quarter earnings, including strong usage growth in November, continued acceleration in mobile ad revenue growth as desktop usage declined, according to Bank of America Merrill Lynch analyst Nat Schindler, who maintained a 'Buy' rating and $16 a share price target on the company in a note sent to clients.

As SiriusXM and Pandora head into 2013 with diverging earnings and stock performance, its time for investors to realize that both services aren't direct competitors.

A rising prospective paid user base for SiriusXM may translate to earnings, if subscribers continue to see reason to pay for non-music services. Meanwhile, Pandora may need to find new revenue streams to offset content costs.

For more on SiriusXM shares, see why the company's stock surge may not end in 2012.

-- Written by Antoine Gara in New York
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.65 -0.66%
P $8.66 3.10%
SIRI $3.38 -0.59%
FB $101.93 0.92%
GOOG $681.92 -0.32%


Chart of I:DJI
DOW 15,660.18 -254.56 -1.60%
S&P 500 1,829.08 -22.78 -1.23%
NASDAQ 4,266.8370 -16.7550 -0.39%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs