Pandora Media Inc. (P), the Internet radio service, rose to a one-year high as investors focused on better-than-expected fourth-quarter results over the surprise resignation of Chairman and Chief Executive Officer Joe Kennedy.
The shares soared 18 percent to $13.79 at the close in New York. Kennedy said yesterday he made the decision to leave after discussions with the board over the company’s future.
Pandora is gaining listeners from conventional radio broadcasters, ending February with an 8.5 percent share of total U.S. radio listening, according to the company. Potential competition has whipsawed the shares in recent months. Apple Inc. (AAPL) has delayed a competing service until later this year, according to people with knowledge of the situation.
“The numbers looked relatively solid across the board,” James Marsh, an analyst at Piper Jaffray & Co. in New York, said in an e-mail. “Guidance for the fiscal year looked a little better than our forecasts. I suspect solid earnings plus Apple music-service delays are fueling the stock.”
Revenue in the quarter ended Jan. 31 climbed 54 percent to $125.1 million, Pandora said in a statement. That exceeded the $122.8 million average of estimates compiled by Bloomberg. Excluding items, the loss was 4 cents a share, smaller than the 5-cent loss seen by analysts. The net loss grew to $14.6 million, or 9 cents, from $8.18 million, or 5 cents, a year ago.
This quarter, the company forecasts sales of $120 million to $125 million, more than the $118.6 million seen by analysts. Excluding items, the company predicts a loss of 10 cents to 13 cents a share, compared with the 10-cent average estimate.
Pandora pioneered Internet radio, growing to 67 million listeners, or 70 percent all U.S. users, under Kennedy. While its online and mobile services have eaten into the $14 billion local-radio market, revenue growth hasn’t kept up with the ballooning cost of music royalties.
“I reached the conclusion and advised the board that the time is right to begin a process to identify my successor,” Kennedy, 53, said in a statement. He said he’ll remain while the company looks for his replacement.
The board should seek candidates with radio-sales backgrounds at companies like Clear Channel Communications Inc. (CCMO) or Sirius XM Radio Inc. (SIRI), said Michael Pachter, an analyst with Wedbush Securities.
“They don’t need a product development guy,” said Pachter, who is based in Los Angeles and rates Pandora neutral. “They need a chief revenue officer.”
Tim Westergren, the company’s founder and chief strategy officer, isn’t seeking to be CEO, said a person with knowledge of the situation. Kennedy’s departure has been discussed for some time, the person said.
Charles Sipkins, a spokesman for Oakland, California-based Pandora, declined to comment.
The timing of Kennedy’s exit will allow a new CEO to take over before the January 2014 start of a two-year arbitration process that will set royalty rates beyond 2015.
The decision was “pretty recent,” Kennedy said on a conference call. He said he will implement the plan for this year and then “hand the baton to someone who can take the company to the next level after that and levels beyond that.”
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