GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Why Pandora Will Get Better

August 15, 2014 | About:
sandyinvestment

sandyinvestment

1 followers

Pandora (P) may have underperformed for investors in 2014; however, the company’s long-term prospects still look bright. Pandora’s shrewd initiatives will help it establish a cutting edge over its competitors, which is why it warrants a look but at the present valuations.

Decent quarter

Pandora reported an upbeat first quarter 2014 with revenues reaching $180.1 million, up from $170 million in the first quarter of the previous year. The gross margins expanded from 18.7% to 32.1% year-over-year. The sales and marketing expense revenue was up 59% from $33.6 million in the first quarter of 2013 to $53.6 million in this quarter. The first quarter net loss was $25.5 million or $0.13 per share as compared to the last year’s first quarter net loss of $30.2 million or $0.18 per share.

For the second quarter, the estimated total revenues are in the range of $213 million to $218 million while the diluted EPS is estimated to be between break even and $0.03. For the full year 2014, the estimated total revenues are in the range of $880 million to $900 million while the diluted EPS is expected to be between $0.14 and $0.18.

Road ahead

In order to strengthen its bond with listeners, the company made some recent product enhancements like its new alarm clock, sleep timer and station recommendations platform. To enlighten an example of the incremental effects that these programs can have on the company, people who are using the alarm clock on Android are listening to Pandora 30% more days per week and 3% more hours each day than they listened earlier.

Pandora, for its growth, has been focusing on some of its key strategies which have showed impressive results. The total listener hours totaled 4.8 billion hours, a 12% year-over-year increase from 4.26 billion in first quarter of 2013 while Pandora's share of the total U.S. radio market increased from 7.29% last May to 9.13% last month. Also, the Active listeners touched a 77 million mark in May, up 9% year-over-year. The company’s initiative of Mobile monetization also continues to deliver strong results with total mobile RPMs for the first quarter increasing 49% to $34.15 compared to $22.92 in the same period last year. Pandora is available in the top 10 best-selling passenger vehicles, and it has around 5 million unique active users through all of its native automotive integrations. All these measures are credited with the company’s increasing market share.

Pandora One, since its launch, is available to its users for $36 per year while later it is available for $3.99 per month. Over the past five years, content cost for this service has increased 53%. The company, in the wake of optimizing its business, is implementing changes to its Pandora One pricing by increasing it to $4.99 per month for new subscribers and a discontinuation of its annual subscription option.

Pandora announced two new partnerships with Peet’s Coffee & Tea this quarter marking the first time that Pandora has featured a partner-branded radio station in a brick and mortar environment. Peet’s will now have its own customized radio stations on Pandora that will be played in all of its nearly 300 stores across the U.S. and will be available to all Pandora listeners. The partnership with Peet’s allows Pandora to accomplish its mission to make available music for its consumers handy so they can easily find and enjoy their favorite music any time, anywhere.

The company has also benefited from its advertising front, where it had a few local markets in the first quarter and a few more were added earlier this year for a total of 37 local markets where Pandora shares its sales presence.

Conclusion

Pandora took off with a great start as is visible from its first-quarter results. The company is running well across the three strategic priorities that it has been working on, growing listener hours, improving monetization and managing cost of content. With the growth strategies working well across its strategic initiatives, the company is heading towards making profits in future.


Rating: 0.0/5 (0 votes)

Comments

sorenfl
Sorenfl premium member - 1 month ago

I thought you wrote about the Danish juvellery store Pandora that now collaborates with Disney, but a nice analysis anyway
:)

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK