Why Pandora Media Stock Faced the Music

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What: Shares of Pandora Media (NYSE: P  ) were getting tuned out today, falling as much as 14%, and finishing down 10% after a subpar earnings report.

So what: For the calendar fourth quarter, Pandora said revenue increased 52%, to 200.4 million, slightly ahead of estimates at $199.8 million, while adjusted earnings of $0.11 a share was better than expectations of $0.08. Guidance disappointed the market, however, as Pandora said it expects revenue of $170 to $176 million in the current quarter, and a per-share loss of -$0.16 to -$0.14. Analysts were eyeing a loss of -$0.12 on sales of $171.7 million. Guidance for the full year was also light.

Now what: A weak outlook will often send a growth stock falling, but investors have to remember that Pandora shares have been on a remarkable rise during the last year as the company has put many of the market's doubts, whether they're about competition or rising content costs, to rest. The Internet DJ has continued to grow in spite of the launch of iTunes Radio and the spread of Spotify and, thanks in part to solid subscriber gains, is seeing revenue easily outgrow content costs. Those are reassuring signs for the long-term success of the company, and reasons for investors to overlook today's drop, especially since the stock is still up more than 300% since November 2012.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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9/2/2015 4:02 PM
P $17.30 Down -0.16 -0.92%
Pandora Media CAPS Rating: *