Pandora Investors: Expect Losses Through Most Of 2017
The comments came after Pandora gave lackluster first-quarter outlook despite reporting narrower-than-expected losses for the fourth quarter.
Driven by advertisement gains, fourth-quarter revenue of $393 million came in above consensus of $374 million. Adjusted EBITDA was $(30) million versus consensus of $(38) million. Non-GAAP EPS was $(0.13) compared to the Street estimate of $(0.21).
However, Pandora’s first-quarter revenue view of $310 million–$320 million and adjusted EBITDA of $(80) million–(70) million were well below expectations.
“Pandora could surpass our 2017 revenue estimates, but we believe overall profitability in 2017 is less likely,” analyst Michael Pachter wrote in a note.
Rating And Justification
That said, Pachter maintains his Outperform rating and $15 price target on the stock, hoping that Pandora could add more subscribers to its on-demand music and expand internationally in 2018.
“We believe that Pandora can convert at least 1 million Pandora Plus subscribers to on-demand and can attract 1–2 million net new U.S. on-demand subscribers in 2017, while up-selling ad-supported customers to its Pandora Plus service,” Pachter highlighted.
The analyst noted that if Pandora can inexpensively transition 375,000 ad-supported users in the fourth quarter to Pandora Plus, then it can do the same with on-demand once it rolls out the service in March.
Pachter also believes its 2017 revenue estimate of $1.67 billion may prove to be conservative, and the company could deliver upside should conversion to on-demand scale more rapidly.
Shares of Pandora closed Thursday’s trading at $12.62. In the pre-market hours Friday, the stock was seen down 2.14 percent to $12.35.
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