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March 08, 2012

Radio Blast: Pandora Falls to Two Month Low after Releasing Financial Results

By Ed Silverstein, TMCnet Contributor

Shares of Pandora (News - Alert) reached what was described as a 2-month low on Wednesday – following the release of recent financial results and guidance for the current quarter and fiscal year. At the close, Pandora had dropped $3.41 to finish at $10.86, according to news reports.

It was reported that Pandora – an Internet radio provider – will also see a quarterly loss 18 to 21 cents, and a 2013 full-year loss of between 11 and 16 cents, according to a report from Nasdaq. Also, fiscal 2013 revenue is projected to between $410 million and $420 million, company statements said.

Dow Jones reported that increasing costs are a big concern. Costs related to royalties and acquisition of content more than doubled in the recent quarter – to $48.2 million, Dow Jones said. In the prior year’s quarter they were $23.9 million. But the company does have some positive trends.

Pandora had 62 percent more users and saw 74 percent more revenue from ads. Yet, content-acquisition costs more than doubled, to $48.2 million in the quarter, Dow Jones said. And sales during the 1Q will come in at between $72 million and $75 million – less than the $86.4 million predicted by analysts, Bloomberg News said.

The results released this week were for the 4Q and entire fiscal 2012 year, which ended on Jan. 31, and projections were issued for the 1Q and fiscal 2013.

The company is putting a positive spin on events. “The fourth quarter was a strong finish to fiscal 2012, which was highlighted by record revenue, radio market share, listening hours and active users,” Pandora CEO Joe Kennedy said in a press release.  ”Reflecting on our first fiscal year as a public company, we have many accomplishments to be proud of and much to look forward to in the year ahead.  Pandora continues to rapidly disrupt the radio industry and has only just begun to realize the potential of our $37 billion U.S. market opportunity.”

But some analysts are not as upbeat. “The shares will be under significant pressure in the near term, and there are some challenges to monetization as Pandora shifts to a mobile model,” Doug Anmuth, an analyst with J.P. Morgan, wrote to clients on Wednesday, Dow Jones said. “But we continue to believe Pandora is a compelling long-term play on mobile advertising.”

Some 70 percent of its users listen to Pandora through mobile devices, according to Bloomberg (News - Alert). “Mobile growth will also allow this company to grow at a 100 percent next year,” Laura Martin, an analyst at Needham & Co., told Bloomberg.

Pandora is looking at some different markets to increase revenue. For example, in November it partnered with DMX to offer a commercial version of the service, according to TMCnet. Retail stores and restaurants will use Pandora’s customizable streams of music, TMCnet added.

Edited by Jennifer Russell
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