Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of online radio company Pandora Media (NYSE: P ) plummeted 25% on Wednesday after its quarterly results and guidance disappointed Wall Street.
So what: Pandora's fourth-quarter revenue jumped an impressive 71%, but a loss of $8.2 million -- more than twice as a big as last year -- and a weak current-quarter outlook are triggering concerns over its long-term profitability. While the company continues to add listeners at a solid rate, disappointing mobile service revenue isn't keeping up with rapidly rising sales and programming expenses.
Now what: Looking ahead, management sees an adjusted first-quarter loss of $0.18-$0.21, well below the consensus of a $0.02 loss. Of course, Chairman and CEO Joe Kennedy reassured investors that Pandora "continues to rapidly disrupt the radio industry and has only just begun to realize the potential of our $37 billion U.S. market opportunity." Given the strong headwinds working against Pandora, however, I'd continue to be cautious about buying into that bull case.
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