Pandora shares sink on out-of-tune outlook

The Internet's biggest radio service nearly doubles its mobile revenue but its expectations for profit strike a sour note with investors.

Pandora Media, the company behind the Web's biggest radio service, touted big sales gains in its fiscal second quarter, as mobile revenue nearly doubled from a year earlier -- but investors were dismayed by its outlook for profit to come, pushing shares down in after-hours trading.

The company reigns over the Internet radio market, but it faces an uncertain future, with its leadership unclear just as behemoth Apple prepares to roll out its own Web radio product, iTunes Radio, this fall.

Thursday, Chairman and Chief Executive Joe Kennedy -- who's set to leave Pandora once its board finds a successor -- called the latest period "an important inflection point in Pandora's history."

"Strong momentum in our mobile business...clearly demonstrates the leverage in Pandora's business model," he said in a statement. "To drive future growth, we are accelerating investment."

A profit outlook that paled in comparison to Wall Street hopes cast a gloomy light on the promise of deeper investment.

In the current quarter, the company predicted it would report adjusted earnings between 3 cents and 6 cents a share, but analyst estimates for the figure averaged 8 cents. For its full fiscal year, Pandora raised its outlook, but the boosted range didn't go as far as expected.

Shares fell as much as 13 percent in after-hours trading, though they recovered to a 3.6 percent decline at $21.92 in later trade. Lofty expectations for Pandora's revenue gains had pushed the shares to an all-time high earlier this week.

The company's top line was a bright spot. Revenue rose 55 percent, to $157.4 million, including a 44 percent boost in ad revenue. Mobile revenue was up 92 percent from a year earlier.

Pandora also noted that total listener hours grew 18 percent, to 3.88 billion for the quarter.

For the quarter ended July 31, Pandora reported a loss of $7.8 million, or 4 cents a share, compared with a year-earlier loss of $5.4 million, or 3 cents a share. Stripping out unusual costs, per-share earnings rose to 4 cents, beating the company's May forecast.

 

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