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.""