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Why Pandora Media Inc Shares Got Pummeled Today

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 Pandora Media Inc (NYSE: P  ) dropped more than 16% Friday after the streaming music specialist turned in solid first-quarter results, but followed with disappointing second-quarter guidance.

So what: Adjusted quarterly revenue rose 54% year over year, to $180.1 million, which translated to an adjusted loss of $0.13 per share. Analysts, on average, were looking for a wider adjusted loss of $0.14 per share on sales of just $174.94 million.

For the current quarter, however, Pandora expects revenue in the range of $213 million to $218 million, with adjusted earnings per diluted share between $0.00 and $0.03. By contrast, analysts were modeling higher adjusted second-quarter earnings of $0.05 per share on sales of $219.34 million.

Now what: To be fair, Pandora also slightly raised its full-year 2014 outlook to a level roughly in line with analysts' expectations. Now, Pandora expects adjusted revenue in the range of $880 million to $900 million, with 2014 adjusted earnings per share of $0.14 to $0.18. Analysts went into the report seeing 2014 earnings and revenue on the same basis of $0.16 per share and $892.31 million, respectively. 

As it stands, the big worry is that Pandora's growth is stalling; Q1 listener hours grew just 12%, to 4.8 billion, and active listeners in March only increased 8% from the same year-ago period. This certainly doesn't mean Pandora can't reward patient shareholders as it continues striving toward sustained profitability from here; but it can only do so much over the long term as its top-line increases wane.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 25, 2014, at 7:48 PM, BillFromNY wrote:

    Not really a surprise to someone detached from the situation. Pandora was first to provide an intelligent jukebox streaming service and it has a very good product.

    But there are no moats to hold off competitors. When Spotify enters the market it's no big deal. But when it's Apple and its trillion dollars of cash, there you can see a problem. Apple can afford to pay overly-greedy royalties for ten years while they work out a reasonable settlement. Not Pandora.

  • Report this Comment On April 26, 2014, at 10:53 AM, prvt2 wrote:

    Does Facebook have any Cash left over ???

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9/3/2015 11:13 AM
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Pandora Media CAPS Rating: *