NEW YORK (TheStreet) –– Investors were leaving Pandora (P) shares in droves on Friday after the company posted weaker-than-expected fourth-quarter results and issued first-quarter and full-year guidance well below analysts' expectations.
For the fourth quarter, the company earned an adjusted 18 cents a share on revenue of $268 million, up 33% year over year. Analysts were looking for earnings of 18 cents and $276.5 million in revenue.
Pandora ended 2014 with 81.5 million active listeners, or those who use the service more than one a month.
Shares were falling sharply in Friday trading, down 18% to $15.11.
First quarter and full-year guidance underwhelmed Wall Street. For the first quarter, revenue is expected to be between $220 million and $225 million, below estimates of $243 million. For all of 2015, Pandora expects sales to be between $1.15 billion and $1.17 billion, below the $1.21 billion Wall Street consensus.
Following the results, analysts were mixed on the company's prospects going forward. Here's what they had to say:
Canaccord Genuity analyst Michael Graham (Buy, $28 PT)
"Pandora's 4Q report disappointed on the top line due to what seems like temporary holiday weakness in national advertising from three verticals: retail, telecom, and CE. In addition, 2015 guidance was below consensus for revenue and even further below on EBITDA. That said, the company had a very strong quarter from a listener growth perspective, adding 5 million active listeners (this appears to have been somewhat back-end loaded in the quarter, judging from the slower hours growth). We continue to believe Pandora will grow into a much larger company. While the stock may not achieve full investor sponsorship until we gain clarity on content costs, we believe the current price will ultimately seem like a bargain."
Pacific Crest Securities analyst Andy Hargreaves (Outperform, $20 PT)
"We are reducing our estimates for ad revenue growth and incremental profitability, which drives our DCF-based price target to $20 from $35. We continue to view Pandora as a unique asset that is changing radio advertising. However, our confidence in the leverage inherent to the business has dropped significantly. If we do not gain increased confidence in the company's ability to generate a return on its 2015 spending, we are likely to downgrade our rating on the shares."
Credit Suisse analyst Stephen Ju (Neutral, $21 PT)
"Pandora reported softer-than-expected top-line results -- with the shortfall a function of weaker-than-expected national radio budgets in three verticals (telco, retail, and CE). Management issued FY15 guidance for revenue and Adj. EBITDA also below consensus and CS forecasts. Local ad revenue growth remained strong (+90% year over year) and consumer engagement returned to growth in 4Q14 highlighted by a record holiday listening season. While we have adjusted our FY15 and longer term estimates downward -- we believe guidance parameters could prove to be conservative in the event the consumer marketing initiatives begin to exert benefits to advertising revenue. We remain Neutral as the disruption in advertising revenue growth and the pending CRB rate reset exert an overhang on P shares -- our target price is now $21 (vs. $24 prior)."
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