Pandora's Earnings May Leave Investors Silenced

NEW YORK ( TheStreet) - Pandora ( P) shares have zoomed since the start of the year, but the company's fourth-quarter earnings report may open up "Pandora's box" for investors if the growth isn't there.

Since 2012 started, shares of the Internet radio company have appreciated 46.45%, besting the likes of competitors such as Sirius XM ( SIRI). But the stock may be ripe for a pullback if earnings don't meet or beat analysts' expectations.

Wedbush Securities analyst Michael Pachter noted that investors take a short-term outlook when looking at stocks, and meaningful earnings growth may not be around the corner.

"Although investors tend to have a short-term outlook when evaluating stocks, we believe management is correct in focusing on more meaningful earnings growth long-term, as the stock should eventually receive increased EPS estimates at higher P/E multiples due to a steeper growth curve," Pachter wrote in a research report. He rates Pandora overweight with a $14 price target.

J.P. Morgan Doug Anmuth is positive on Pandora, but believes user growth will continue to constrain profitability in the near-term.

"We recognize that very strong growth in usage hours driven by mobile will continue to weigh on profitability in the near term, but in the meantime, we believe that Pandora will build significant market share and that the ability to monetize mobile hours will improve over the next few years and drop down to the bottom line," Anmuth wrote in a research note earlier this month. He rates Pandora overweight with a $22 price target.

While Wells Fargo analyst Jason Maynard believes that Pandora is likely to meet or exceed his own estimates due to user growth, he noted that content acquisition costs are likely to constrain earnings growth. Maynard noted that Pandora trades at a premium to its comparable group, which includes OpenTable ( OPEN), ( PCLN) and LinkedIn ( LNKD), but that is due to higher revenue growth. Maynard rated Pandora shares outperform with a $21 to $23 price target.

In January, the company highlighted it now has more than 125 million users, up from 100 million in July 2011. The average listener time has also increased to 18 hours a month.

Pandora shares fell following its third-quarter earnings reports, despite better-than-expected profit and revenue.

Analysts polled by Thomson Reuters expect Pandora to report a loss of 2 cents a share on revenue of $83.06 million tonight after the close of trading.

Pandora went public in June 2011 to much fanfare, raising $235 million in the offering. Shares are still below their IPO price of $16.

Pandora shares closed higher Monday, gaining 5.5% to $14.66.

-- Written by Chris Ciaccia in New York

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