This Day On The Street
Continue to site
ADVERTISEMENT
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

Pandora Earnings Preview: What Wall Street's Thinking

NEW YORK ( TheStreet) -- Pandora (P ) will report its fiscal 2014 second-quarter earnings Thursday after the bell.

Analysts polled by Thomson Reuters expect the Internet radio company to earn 2 cents a share on earnings of 156.22 million. Last quarter, Pandora lost 10 cents per share on $128.5 million in revenue, a 58% increase year-over-year, matching analysts' expected EPS and beating expected revenues of $123.96 million.

Wedbush's Michael Pachter maintained both his "neutral" rating on the stock and his price target of $19.50, estimating the company will earn 2 cents per share on revenue of $162 million. "It appears to us that Pandora may have turned the corner in terms of monetization and profitability," he wrote, citing advertising growth and integration with media buying platforms and Internet radio productivity measurements. Pachter kept his "neutral" rating, choosing not to upgrade it due to "the looming threat of Apple's iTunes Radio and uncertainty over long-term royalty costs." Other risks to Pandora's stock are the imposition of data caps by Internet service providers and competition from newer mobile radio applications.

In contrast, Rob Sanderson of MKM Partners predicted higher earnings, between $163 and $165 million, or 4-6% above consensus, earning 5 cents per share. He noted Tuesday that Pandora's shares are up 29% since its last earnings report, while the NASDAQ as a whole is up 3.8%. While last quarter's growth was driven primarily by subscriptions, Sanderson argues that Pandora will "need to report a clear beat in mobile ad-revenue for the stock to maintain its recent gains." Nonetheless, he expects a "solid beat-and-raise" due to increases in local advertising and positive feedback on integration into radio advertising agency buying platforms. Since Pandora instituted a listening cap, growth in listening hours has declined sharply, to which Sanderson attributes large savings in content costs and increased mobile ad RPM. However, like Pachter, he identifies iTunes Radio as a potential threat to Pandora, with the cap incentivizing the heaviest Pandora users to try iTunes Radio when it releases in the fall.

Barton Crockett of Lazard Capital Markets models EPS of 1 cent on revenues of $159.8 million, just above consensus. He ascribes Pandora's strength in part to its Music Genome Project, which makes the company "a brilliant solo act" and will "allow it to maintain a meaningful position in a burgeoning Internet radio market." He identifies upside risks including falling content costs, higher mobile ad RPMs, and fizzling new competition, while downside risks include rising content costs and negative growth. Thus, given the "long-term concerns around music royalty costs and rising competition" surrounding Pandora, Crockett believes its shares are fairly valued.

-- Written by Laura Berman in New York

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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
P $18.33 -0.81%
AAPL $132.54 0.88%
FB $80.54 0.07%
GOOG $540.11 -0.44%
TSLA $247.73 0.86%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs