Predicting Pandora's Earnings

| About: Pandora Media (P)
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Pandora (NYSE:P) said during last quarter's conference call that it would switch to reporting earnings based on calendar year and this time it would report for the two month period of November and December. Based on its past reports, I expect the announcement to be sometime during the week of the 20th, though a date has not been announced.

Pandora just announced excellent December listener metrics, which caused the stock to jump 15%. The comparison gets complicated because this next earnings release contains only two months. So I will use their numbers per billion hours and attempt to estimate its earnings based on past quarter metrics compared to November and December metrics.

Here is the last year of Pandora listening hours. For December they reached a peak of 1.58 billion hours:

Here is the last year of Pandora total radio market share, which reached 8.6%:

Here is the last year of Pandora total active listeners. In December, Pandora had 76.2 million active listeners:

To simplify my earnings calculations, I will use Pandora's revenues and earnings by billion listener hours. Here is their revenue per billion listener hours:

For the next two-month earnings report, we have total listener hours of 3.07 billion. Using the chart above, we get a revenue of $48 million per billion hours giving us a total revenue of $147 million, higher than the guidance by about $10 million.

Here is their profit per billion listener hours:

Based on this chart, Pandora could turn profitable with an estimated profit of just over $1 million. But since this is only a two month period I'd estimate break-even to minor profit.

Considering Pandora's guidance of 218 million diluted shares, we have an EPS of 0 to less than 1c. This is a chart of their GAAP numbers. On an non-GAAP basis, Pandora's EPS guidance is a 5c - 7c.

Here are other numbers in terms of billion hours:

Both content and marketing costs per billion hours are growing but stabilizing.

Both, subscription and ad revenues are growing and at a faster rate than the major expenses.


Based on the numbers above, Pandora is expected to do well. Longer term, I am of the opinion that Pandora will also gain in-car listening share from Sirius (NASDAQ:SIRI) as Pandora and other smartphone-like connected features spread to more cars like the expected Audi and Google (NASDAQ:GOOG) tie up. This is because I believe that smart features will be part of a car's standard software and SiriusXM hardware will be an optional extra. Pandora has also been doing an excellent job of improving advertising revenue and I expect their new in-car advertising to add to that growth even further.

New competitors constantly launch but Pandora has a significant technology and market lead, thanks to almost universal access amongst devices including Smart TVs, Blu-Ray players and others. My expectation longer term is that much of the competition will either consolidate or die out. Just like Rdio recently shut down its Vdio service, many online radio services will fail to gain traction against bigger fish like Pandora and Apple (NASDAQ:AAPL) iTunes radio.

Disclosure: I am long AAPL, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I may open a long position in Pandora on dips.