Pandora Media, Inc. (NYSE: P) is seeing something very unusual this morning.  The stock is up huge after earnings.  It is hard to believe, but Pandora beat earnings and managed to raise its guidance.  The results of -$0.09 EPS with a 58% sales gain to $74.3 million, while Thomson Reuters had estimates of

For the full year, Pandora sees revenues up in a range of $420 million to $427 million versus its prior forecast of $410 million to $420 million.  Its non-GAAP loss is now put in a range of -$0.11 to -$0.07 versus a prior range of -$0.16 to -$0.11 per share. Part of Pandora’s growth is due to a larger buildup of its sales force to better compete in advertising.

One issue that Pandora still faces is higher content costs.  As it grows in reach and listening, its expenses rise in a what is effectively a straight line.

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is in a potential disarray after a large share sale by CEO Mel Karmazin that may actually help John Malone and Liberty Media Corporation (NASDAQ: LMCA) in its quest to take it over while Karmazin is publicly trying to defend the company against Malone’s efforts.

Pandora is up 18% at $12.22 in the pre-open session and this would generate an implied market capitalization rate of $2 billion.  That is valuing Pandora at 4.7-times revenue expectations for 2012.  SIRIUS XM is worth some $7.56 billion in market value, but it trades at only about $2.25-times revenue expectations of $3.37 billion for 2012.  Another difference between these two companies is that SIRIUS XM is profitable and it has a lot of exclusive content that Pandora does not have.

It is hard to think that things might be making a good turn at Pandora due to its cost structure, but that is what the market vote is with real trading and investing dollars this Thursday.

JON C. OGG

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