Pandora Media (P) posted solid quarterly results. Though the company came up with good results, yet it failed to maintain its market share. The stock crashed 16%, leaving the company in a soup. The reason behind the fall of the company's market share can be seen in the weak guidance. Let us find out whether Pandora still has room to improve or if it is a stock to stay away from?
Quarterly performance
Pandora's quarterly revenue came in at $194.3 million, which was more than $177.7 million analysts' estimates. On the earnings front, Pandora posted a net loss of $0.13 per share, which was a penny better than what analysts expected. However, strong results by Pandora failed to impress investors, and as a result, the stock fell 16% on the stock market.
However, Pandora's active users' increased 8% year-over-year from 69.5 million to 75.3 million in the first quarter of 2014. Also, the company is seeing a solid response from listeners as it saw a 12% growth in listening hours. This clearly indicates that Pandora is growing and gaining traction.
Impressive strategies
To be competitive with its peers and to attract more listeners, Pandora has made some impressive moves. It has introduced many exciting features such as alarm clock, sleep timer, and a station recommendations platform.
In addition, the company is also focusing on expanding Pandora's availability. Under this, Pandora is extending its access and usage in autos and consumer electronic devices. For example, Pandora is now available in 10 out of 10 of the best selling passenger vehicles, and there are now more than 5 million unique users active in Pandora through all of its native automotive integration.
Moving ahead, according to some sources, Pandora's total U.S. radio listening increased from 8.1% to 9.1% in the last one year. This is a concrete sign for Pandora's growth, and with growing internet users, Pandora expects this percentage to increase further in the future.
Risks
Pandora is currently embroiled in a copyright infringement lawsuit brought by several major record labels, including Sony Music, Universal Music, and Warner Music accusing the company of failing to pay for content produced before 1972. This might hurt Pandora's image. The company also posted a weak outlook for the second quarter, and this is another concern.
Trying to improve
Moving ahead, Pandora is focusing on providing variety to users. So, Pandora is introducing listeners to music they love and is reintroducing favorites. So, it is expecting more listeners to engage with Pandora. This might help the company regain its market share.
To further engage listeners and to provide new opportunities to advertisers, Pandora is hosting a series of live personalized concerts designed to connect fans with artists they love in a live setting. Pandora has the unique ability to determine the optimal artist for each city by analyzing the musical preferences of local listeners. To further enhance its existence, Pandora recently announced a new partnership with Peet's Coffee & Tea. This is the first time that it has entered into a featured partnership in the brick and mortar environment.
With this partnership, Pandora will be played in around 300 stores across the U.S. Also, the inclusion of Pandora measurements via Triton Webcast Metrics locally in Telmar is yet another positive indication that the demand for online radio is growing among the broadcast buying community.
Conclusion
Though the stock crashed, yet there is much room for Pandora to grow. So, Pandora might be struggling now, but strong growth in the end market and the growing adoption of its radio service will lead to long-term growth, making it a good buy on the pullback.
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