Why Pandora Media (P) Stock Is Falling Today

NEW YORK (TheStreet) -- Pandora Media (P) shares are down -1.3% to $24.70 on Wednesday following the announcement that rival Spotify had reached a subscription milestone, surpassing 10 million paid subscribers worldwide.

The Internet music streaming service announced that it had 10 million paying subscribers and 40 million active users in 56 markets across the world.

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The company allows users to access its music database for free with ads or through a premium service costing $9.99 a month without ads. Paid subscription services were up 57% to $628 million last year while digital downloads decreased 1% to $2.8 billion according to the Recording Industry Association of America.

Pandora CFO Mike Herring declared Pandora king of the digital music streaming mountain at a Bloomberg panel yesterday, despite increased competition from Spotify and a potential Apple  (AAPL) and Beats Music collaboration.

Panora's Pandora One ad free subscription service currently has 3.3 million paid users, while 250 million registered users access the free service with advertisements.

TheStreet Ratings team rates PANDORA MEDIA INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate PANDORA MEDIA INC (P) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been generally deteriorating net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Internet Software & Services industry. The net income has decreased by 1.2% when compared to the same quarter one year ago, dropping from -$28.59 million to -$28.93 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, PANDORA MEDIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PANDORA MEDIA INC has improved earnings per share by 12.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PANDORA MEDIA INC reported poor results of -$0.30 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus -$0.30).
  • 38.29% is the gross profit margin for PANDORA MEDIA INC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -14.88% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 82.27% to -$2.24 million when compared to the same quarter last year. In addition, PANDORA MEDIA INC has also vastly surpassed the industry average cash flow growth rate of 23.29%.
  • You can view the full analysis from the report here: P Ratings Report
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