Pandora Sinks on Low User Numbers, Weak Outlook

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Pandora Media Inc. (NYSE: P) reported third-quarter results after markets closed Tuesday. For the quarter, the Internet radio company posted an adjusted diluted net loss per share of $0.07 on revenues of $351.9 million. In the same period a year ago, the company reported a net loss of $0.11 on revenues of $311.56 million. Third-quarter results compare to the consensus estimate for a net loss of $0.06 on $366.33 million in revenues.

The company posted a consolidated adjusted EBITDA loss of $6.6 million in the quarter compared with a profit of $31.5 million a year ago. The adjusted number does not include $32.8 million in stock-based compensation expense, $15.8 million in depreciation and amortization, $5.9 million in other charges, and $400,000 in a provision for income taxes.

In the closely watched metric of active listeners, Pandora reported 77.9 million compared with 778.1 million in the same period a year ago. Total listener hours rose 5% in the quarter from 5.14 billion a year ago to 5.4 billion.

For the fourth quarter, Pandora is guiding revenue revenue at $362 to $374 million and an adjusted EBITDA loss in a range of $39 to $51 million. For the full 2016 fiscal year, Pandora said it expects revenue in a range of $1.354 to $1.366 billion and an adjusted EBITDA loss in a range of $128 to $140 million.

Analysts were looking for a fourth-quarter net loss of $0.01 and revenues of $391.73 million. For the full year analysts expect a net loss of $0.41 and revenues of $1.4 billion. Pandora’s guidance is lower than these estimates in every case, and that will send investors toward the exits.

The company’s founder and CEO, Tim Westergren, said:

Pandora’s transformation continues with the launch of compelling new products and partnerships that open up significant revenue streams. Only Pandora is uniquely positioned to create deeply personalized and easy to use listening experiences that delight and engage listeners. A great product that’s effectively monetized is the cornerstone of success in digital music streaming.

Shares traded down about 5.5% in the after-hours market at $11.50 after closing at $12.18. The stock’s 52-week range is $7.10 to $16.23, and the 12-month target price for the shares was $15.46 before this afternoon’s report.

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