All eyes -- and ears -- will be on Pandora Media
The music-discovery website operator serves up its latest quarterly results tomorrow night, and there's plenty riding on the report.
Pandora's stock was clobbered last time out. Issuing guidance calling for a sequential dip in revenue and a wider deficit than analysts were targeting for all of 2012 didn't go over too well. It also didn't help that Pandora posted a larger loss than Wall Street was expecting after surprising the market with back-to-back quarters of profitability.
That's rearview mirror stuff now. There's a reason the stock is trading well below last year's IPO price of $16. If the streaming service can find a way to impress the jaded market -- which may be easier than you think given the hosed-down expectations -- Pandora will be treated well by Mr. Market.
Analysts see Pandora posting a loss of $0.17 a share on $74.4 million in revenue. The top-line growth would be impressive on a year-over-year basis, but it's a swift sequential drop from the $81.3 million it rang up during the holiday quarter.
The sequential dip is already baked into the share price. Investors know that Pandora's problem is that too many of its 51.9 million active listeners are freeloaders. A whopping 87% of Pandora's revenue comes from online advertising.
Contrast that to Sirius XM Radio
Pandora's challenge will be monetizing an audio service, particularly in mobile. Pandora is one of Millennial Media's
All of this would be solved if Pandora could get more of its users to pay for ad-free streams, but that seems unlikely unless the company wants to risk alienating its huge audience base.
Pandora isn't in a perfect place, but its time as a busted IPO won't be long if it finds a way to simply stay ahead of the market's pessimistic opinion.
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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Millennial Media. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.