Please ensure Javascript is enabled for purposes of website accessibility

Why Pandora Media Stock Faced the Music

By Jeremy Bowman – Feb 6, 2014 at 6:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Pandora shares fell after weak guidance in its earnings report. Here's what you need to know:

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 thesis.

What: Shares of Pandora Media (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.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pandora Media, Inc. Stock Quote
Pandora Media, Inc.
P

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.