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's happening: Shares of Pandora Media Inc (NYSE:P) initially dropped as much as 9.7% early Friday, then quickly rebounded to trade up more than 5% on the day after the streaming music specialist's first-quarter results beat expectations.
Adjusted quarterly revenue grew 28% year over year to $230.8 million, which translated to an adjusted net loss of $0.12 per share. Analysts, on average, would have settled for an even larger net loss of $0.16 per share on lower sales of $224.6 million.
Why it's happening: After Pandora stock fell in after-hours trading last night, I noted that the market once again appeared frustrated with the sluggish 5.1% growth in its active listener base to 79.2 million. Analysts polled by FactSet were expecting a slightly higher total of 80.2 million.
However, I also agreed with Pandora management that more important to Pandora's results were its combination of increasingly loyal users and fast-growing local ad base.
On loyalty, Pandora says total listener hours grew 11% to 5.3 billion during the quarter, again outpacing the growth in the number of listeners. Pandora also stated user engagement reached an all-time high of 22.3 hours per active user per month. And during the subsequent conference call, management stated that at the end of the quarter, Pandora's share of U.S. radio listening exceeded 10% for the first time, up from 9.1% in the year-ago period.
Pandora's revenue also included a 27% jump in advertising revenue to $178.7 million. Within that, local advertising revenue grew an impressive 67% over the same period to $43.3 million, representing roughly 24% of total advertising.
In the end, given both the above stats and Pandora's solid top- and bottom-ine beats, it's unsurprising the market changed its tune this morning once it had time to fully digest the results.