2Q Preview: Is the IPO Grizzly Bear Coming for Pandora (P) Next?


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August 28, 2012 1:43 PM EDT Send to a Friend
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Price: $15.67 +0.77%

Rating Summary:
    17 Buy, 13 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 12 | Down: 19 | New: 22
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Shares of internet radio company Pandora Media (NYSE: P) are down 1.9 percent since the end of June, which capped a second quarter performance that could best be described as "choppy." The company reports second-quarter 2013 earnings after U.S. markets close tomorrow and shares are trading higher on Tuesday in preparation for solid results. Analysts are expecting the company to report a loss 3 cents per share, in-line with last year’s EPS, on revenue of $101 million.

Analyst say the company is well positioned to take advantage of growth in smartphones and tablets, and that many consumers consider Pandora a must have app. However, considering the beating that Pandora’s IPO peers Facebook (Nasdaq: FB) and Zynga (Nasdaq: ZNGA) have taken, many are feeling cautious ahead of the earnings print.

Data from Streetinsider.com's ratings insider has 15 analysts with a Buy rating on Pandora, 8 have neutral rating, and 3 rate the company a sell. The average price target is $13.84, with a range of $20 to $3.75.

Analyst Comments:
  • “We believe the lack of meaningful earnings has negatively impacted valuation. We believe management is correct in focusing on more meaningful earnings growth in the long-term. However, we believe that investors will lose patience if Pandora’s earnings growth lags its advertising revenue growth significantly in 2H:13,” said analysts at Wedbush.

    “We expect Q2 results above the high end of guidance. We expect revenue above our estimate of $102 million, compared with consensus of $101 million, and guidance of $99 – 101 million. We expect the top-line beat to be driven by slightly better-than-expected CPMs that reflect a stronger advertising presence and continued market share gains,” analyst Michael Pachter.

    “In addition, we expect EPS above our estimate of $(0.01), compared with consensus of $(0.03), and guidance of $(0.05) – (0.03). We expect management to raise FY:13 guidance for revenue of $420 – 427 million and EPS of $(0.11) – (0.07). However, we do not expect the beat to be fully passed through. After exceeding the high-end of guidance in two of three quarters as a public company, and after failing to fully pass through the Q1 EPS beat, we expect management to once again be conservative,” added Pachter.

  • “Strategic differences between Pandora and companies influenced by the Face Book ecosystems lead us to conclude Internet Radio will be influenced by long-term fundamentals driven by the migration of Audio content from Terrestrial Radio to IP distribution,” said analyst Rich Tullo of Albert Fried and Company.

  • “We predict P revenue to expand 50% Y/Y to $100.4 million in F2Q13E from $66.9 million in F2Q12A. We expect, content costs to expand 95% to $65.8 million in F2Q13E from $33.7 million in F2Q12A as increase service usage and rate card increases weigh on results. Thus we expect P to post a $13 million loss in F2Q13E (-$0.08 per share) as compared to a $3 million loss in F2Q12A. We note the $13 million loss we expect is a modest sequential improvement from $20 million in F1Q13A,” added Tullo.
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Pandora's past performance at Streetinsider's Pandora's Income Statement.

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