Pandora Media Inc (NYSE: P) stock jumped more than 20 percent on Wednesday after the company beat Wall Street revenue expectations handily for the second consecutive quarter. However, while investors cheer Pandora’s growth, analysts say the company’s path to profitability will be difficult.
Pandora reported a second-quarter earnings per share loss of 15 cents on revenue of $384.8 million. EPS was slightly better than consensus analyst estimates of a 16-cent loss, but revenue was well above the $372.8 million analysts had anticipated. Second-quarter revenue was up 12 percent from a year ago.
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Pandora added 351,000 paid subscribers in the second quarter, bringing its total paid subscriber count to about 6 million. Pandora’s paid subscriber count is up 23 percent from a year ago. Subscription and other revenue was up 65 percent in the second quarter to $113.7 million, while advertising revenue was down 2.6 percent to $271 million.
“We made continued progress against our strategy, with total revenue growing 12 percent, subscription revenue up 67 percent and ad hour trends improving for the third straight quarter,” CEO Roger Lynch says in a statement. “New partnerships with top brands like Snap ( SNAP) and AT&T ( T), as well as enhancements to our ad tech and programmatic offerings, position us to further accelerate growth and ownership of the expanding digital audio marketplace.”
Advertising revenue per 1,000 impressions was up 4 percent to an all-time high of $68.75 in the quarter. Total listener hours were 5.09 billion, down from 5.22 billion a year ago. Pandora reported a total of 71.4 million active users.
Looking ahead, Pandora guided for third-quarter revenue of between $390 million and $405 million. The midpoint of that range is above consensus analyst estimates of $394.6 million.
Wednesday morning’s big gain in Pandora stock is a clear indication that the market likes what it saw from Pandora’s quarter, but Bank of America analyst Nat Schindler says Pandora has a long way to go before it’s stock is a good investment.
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“We continue to struggle to find a path to profitability for Pandora,” Schindler says. “Long-term, we are cautious on profitability potential given falling users and engagement and user competition from Apple ( AAPL), Google ( GOOG, GOOGL) and Spotify ( SPOT).”
Bank of America has an “underperform” rating and $5.60 price target for Pandora stock.
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Earnings Beat Is Music to Pandora Media Inc (P) Stock Investors originally appeared on usnews.com
