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

Will Pandora Ever Make Money?

NEW YORK ( TheStreet) -- Pandora (P - Get Report) investors panicked when Apple (AAPL) announced iTunes Radio, effectively proclaiming the tech giant's entry into the already crowded realm of Internet music.

Pandora, already in a heated battle with, among others, Spotify and Sirius XM (SIRI), had figured out ways to keep growing its popular service, albeit amid some "fading notes."

Last week, the company announced total listening hours for the month of August rose 16% year over year to 1.35 billion hours. The number of people that sign on to the service each month also increased, by almost 30% to 72.1 million, which represents 1% sequential improvement. What this means is that, with a year-over-year improvement of 116 basis points, Pandora now accounts for 7.5% market share of the U.S. radio listening audience.

This is impressive growth. Admittedly, I haven't been Pandora's biggest supporter. But there is no way to spin this performance without giving the company its due credit. Unfortunately, however, making money has not been one of Pandora's strengths, despite such solid growth and meaningful market share.

Now, with Apple's iTunes Radio, not to mention Google's (GOOG) All Access service fully in the mix, it just doesn't seem as if Pandora's top-line performance will ever trickle down to profits.

What this means is that,as hard as Pandora has worked to survive the attacks by Sirius, Spotify, iHeartRadio, Last.fm and a host of other Internet rivals, Pandora will now have to double down on its efforts to secure a meaningful chunk of the $4 billion per year U.S. mobile ad market. I believe this should be one of the company's top priorities.

I'm not suggesting Pandora's August numbers are inconsequential. Nor am I saying management doesn't know what it's doing. I just don't believe, however, that the August numbers change any expectations the Street has had on this company. Yes, the metrics were above market expectations. But let's not forget the numbers were coming from a company with negative earnings.

What I mean by this is, while Pandora's growth numbers were indeed impressive, this is precisely the performance for which investors are paying. No one's buying the stock today for the profits. So I wouldn't get carried away.

Also, as has been the case since the company's inception, investors should continue to expect volatility in the shares, especially since we don't yet know how the arrival of Apple and Google is going to disrupt this market.

1 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
Submit an article to us!
SYM TRADE IT LAST %CHG
P $18.12 3.19%
AAPL $128.70 -0.19%
FB $78.81 -0.23%
GOOG $540.78 0.54%
TSLA $230.51 1.98%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs