Pandora Slumps After Quarterly Forecast Misses Estimates

Pandora Media Inc., the biggest U.S. online radio service, fell as much as 11 percent in extended trading after forecasting results in the current quarter that trailed analysts’ estimates.

The company will post a loss, excluding items, of 14 cents to 16 cents a share in the quarter ending in March, Oakland, California-based Pandora said in a statement today. That compares with the average projection of analysts for a loss of 12 cents. Revenue will be $170 million to $176 million, compared with an average estimate of $172.8 million.

“People expected a higher number,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, wrote in an e-mail. “It’s not a bad guide, just a tad below expectations, and the stock was priced for a guide above expectations.” Pachter has a neutral rating on the stock, the equivalent of hold.

Pandora is closing the gap between its share of radio listening and its percentage of the industry’s advertising revenue. The online service drew more than 8 percent of U.S. listeners in December, while the company has said it gets less than 1.5 percent of radio’s $15 billion in local ad sales.

The first quarter is seasonally the lowest for ad sales, Pandora Chief Financial Officer Michael Herring said in a phone interview. The company also absorbs higher costs in the period as it hires sales staff and engineers and the cost of content rights increases on government-set rates, he said.

Business Reset

“This is the time when we reset the business and invest for the rest of the year,” Herring said. “We will continue to drive bottom-line profitability.”

Pandora will be profitable starting in the second quarter, he said.

The shares fell as low as $32.05 in late trading after Pandora disclosed its results. The stock was little changed at $35.83 at the close in New York and almost tripled last year.

The company reported fourth-quarter results that exceeded estimates. Excluding items, profit was 11 cents a share, beating the 7-cent average estimate. Revenue climbed 52 percent to $200.4 million, surpassing the $196.2 million average projection.

Net income in the quarter was $8.98 million, or 4 cents a share, compared with $1.63 million, or 1 cent, a year earlier.

The company forecasts full-year sales of $870 million to $890 million and adjusted profit of 13 cents to 17 cents a share. Analysts estimated revenue of $894.1 million and profit of 17 cents.

(Pandora executives will discuss results on a conference call at 6 p.m. New York time. To listen, dial +1-877-355-0067 or +1-443-853-1239 for callers outside the U.S.)

Before it's here, it's on the Bloomberg Terminal.