Pandora Media Inc., the biggest Internet radio service, plunged the most in three months after listener growth missed some analysts’ estimates.
Pandora tumbled 13 percent to $24.93 at 9:47 a.m. in New York, after releasing its quarterly results yesterday where profit beat projections and the company raised its 2014 outlook. Earlier the shares fell as much as 14 percent for the biggest intraday drop since April 25. The shares had gained 8 percent this year through yesterday.
Active listeners grew 7.5 percent to 76.4 million users in the second quarter, the Oakland, California-based company said in a statement yesterday. That was shy of the 76.6 million estimate of Corey Barrett, an analyst at Pacific Crest Securities, and a projection of 77 million by Mark Mahaney at RBC Capital Markets.
“Usage is stagnating, I think that’s the fundamental challenge, competition has been starting to take its toll,” Rich Greenfield, an analyst with BTIG LLC, said in a telephone interview. “That’s going to scare the market for what’s supposed to be a rapid growth Internet company.”
Larger companies are building services to compete with Pandora, such as Google Inc.’s purchase of Songza Media Inc. and Apple Inc.’s acquisition of Beats Electronics LLC. The number of Pandora listeners and the amount of time they spend using the service is little changed on a monthly basis from December to June, said Greenfield, who rates the stock a sell.
“We expected to see some seasonality in June, that’s typical,” Brian McAndrews, Pandora’s chief executive officer, said on a conference call with analysts. “We see pick up more in September and relative slowdown in the summer.”
Pandora expects to earn 5 cents to 8 cents a share on an adjusted basis in the third quarter, with sales of $235 million to $240 million. Analysts had seen 8 cents and $234 million.
For the year, the company forecasts 16 cents to 19 cents a share in profit, excluding items, up from the 14 cents to 18 cents it saw in April.
Second-quarter earnings came to 4 cents a share, excluding items. Analysts predicted 3 cents. Sales grew 43 percent to $218.9 million, beating the $218.7 million average estimate.
Pandora’s mobile revenue rose 59 percent to $167.5 million. The company is among the top five mobile advertising platforms, with Google and Facebook Inc. in the lead, according to data compiled by Bloomberg Industries.
“Mobile ad revenue came in below expectations,” Neil Doshi, an analyst at CRT Capital Group LLC, said in an e-mail.
The company’s mobile ad revenue was $134.4 million in the quarter, according to Stephanie Heise, a spokeswoman for Pandora. That compared with Doshi’s projection of $136 million.