Pandora Shares Slump on 4Q Revenue Miss

Shares of Pandora Media fell more than 20 percent in after-hours trading after Thursday’s session after the company posted revenue that missed analysts’ expectations. Investors were also alarmed about the company’s projections for 2015, which also fell short of economists’ consensus predictions. Following the report, which came at the conclusion of Thursday’s trading session on Wall Street, Pandora shares fell from $18.39 a share, where they finished on Thursday, to $14.71 per share. The shares rebounded during Friday’s session, closing at $15.24 per share.

Despite investors’ drastic reaction to Pandora’s 4Q earnings report, analysts noted that their performance wasn’t all that bad. The company’s overall revenue for last year grew 44 percent to $920.8 million, and their net loss shrunk to $30.4 million from $40.7 million in 2013. The firm was also able to lower the amount it pays out in revenues in 2014, from 53.8 percent of revenue in 2013 to just 48.8 percent. But while the full-year numbers were good, investors were alarmed about the company’s performance in the final three months of the year. For the fourth quarter, the report indicated, total revenue came in at $268 million, well below the company’s own forecast range of $273 million to $278 million.

In an earnings call, Pandora CEO Brian McAndrews blamed the fourth-quarter miss on an unexpected change in advertising revenue in December. The executive explained that a number of key advertisers had been increasing the amount of advertising they did on Pandora until the sudden change. When asked if the change was a one-time dip or part of a broader trend, McAndrews said he did not yet know. Of course, the 4Q revenue dip wasn’t the only metric that alarmed investors, as the company forecast revenue between $220 million and $225 million for the current quarter, and between $1.15 billion and $1.17 billion for the full year. In a recent Reuters survey, a group of economists had projected those number to be $244 million and $1.21 billion.

As for Pandora’s non-financial numbers, the number of active Pandora users surged 7 percent in the fourth quarter to 81.5 million. The number of paid subscribers, meanwhile, only rose from 3.5 million to 3.6 million from the end of Q3 to the end of the year. But, while the company’s listener growth slowed, Pandora did make progress in getting people to listen longer, as total hours listened grew by 20 percent to 20 billion hours.