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Pandora (P -4.9%) gives back some of its recent gains after releasing its June audience metrics,...

Pandora (P -4.9%) gives back some of its recent gains after releasing its June audience metrics, which suggest its mobile listening cap is still taking a toll. Pandora's U.S. radio listening share was 7.04%, up from 5.98% a year ago, but down from May's 7.29%, April's 7.33%, and March's 8.05%. Listener hours totaled 1.25B, +17% Y/Y but -7% M/M (can't fully be explained by one less day). Active listeners rose by less than 1% M/M, and 30% Y/Y, to 71.1M. Also: 1) Pandora has updated its iOS apps to feature improved buffering and auto-pause. 2) High-end headphone maker Beats is reportedly thinking of launching a subscription streaming service with AT&T. Shares made new 52-week highs yesterday.
Comments (1)
  • dgulick
    , contributor
    Comments (1488) | Send Message
     
    The 40 hr free mobile listening cap is having the intended effect: forfeiting market share for the bottom line, however I think it has been even more effective than they expected when it was implemented.

     

    Listener hours for June (which directly affects royalty expenses) have dropped 16% from the peak 1.49B hrs set in March (the last month before the cap). However, on the income side, active users (which affects ad and subscription income) set a new high this month at 71.1M, however the cap has slowed growth here as well (they added 1.6M users since March, a gain of only 2%).

     

    With these numbers, the reduced streaming hours could actually produce P's first ever q/q reduction in content costs, despite rising royalty costs per stream. But the key numbers to watch when they report are subs (which grew 40% last qtr as a result of the cap) and mobile ad revenue per 1000 hrs, which last quarter improved by a dramatic 30% y/y, reflecting their large investments in local and national advertising.

     

    After plugging this months metrics into my model, along with an assumption that last quarters improved mobile ad rate was not an anomoly, I get a 0.05 eps, a nice beat (guidance is break even, concensus is 0.02). Mobile ad revenue may not continue to grow at quite the rate of last quarter, but even a modest increase when one considers their reduced royalty spend should result in a guidance raise for the year.
    9 Jul 2013, 06:09 PM Reply Like
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