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Pandora Pops: What Wall Street Is Saying (Update 1)

Updated from 8:16 a.m. EST to reflect turn around in share price and notes from JPMorgan.

NEW YORK (TheStreet) -- Pandora Media (P) shares rose in early trading Friday, after the Internet music giant reported revenue that beat Wall Street estimates for the third quarter but guidance missed expectations.

Oakland-based Pandora earned 6 cents a share on $181.6 million in revenues, up 50% year over year. Analysts surveyed by Thomson Reuters were expecting profit of 6 cents a share on $174.8 million in revenue. Of the $181.6 million in sales, advertising revenue accounted for $144.3 million, of which $104.9 million came from mobile.

Subscriptions and other revenue totaled $37.2 million, up 156% from the year-ago quarter.

For the upcoming fourth quarter, Pandora said it expects to earn 2 cents a share, with revenue between $185 million and $190 million. Analysts were expecting a bit more, with Pandora expected to earn 4 cents per share on revenue of $187.6 million.

Despite the drop in the share price, analysts were largely positive on the quarter, noting the strength in mobile advertising and users, particularly in the face of Apple (AAPL) iTunes Radio, which launched during the quarter.

Even with the slight gain in shares on Friday, Pandora was still one of the year's top-performing stocks. Shares are up 223.1% year to date, blowing past the 25.9% gain seen in the S&P 500.

P ChartP data by YCharts


Pandora had 70.9 million active users at the end of the quarter, up 20% from a year earlier.

Credit Suisse analyst Stephen Ju (Neutral, $27 PT)

"Ad revenue at $144.3mm was in line with our estimate but exhibited a better mix versus our expectation for mobile as its RPM grew 47% YOY, to reach $104.9mm in mobile ad revenue. Desktop RPM was essentially flat sequentially and YOY. The expected Arbitron accreditation announced on the call should remove a significant friction point against greater ad dollar deployment on Pandora and help close the gap between dollar and listener hour share in the more near-to-medium term. Longer term, we expect advertisers to make better use of the more granular targeting and measurement capabilities inherent with Pandora inventory, which should continue to propel RPMs higher."

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