Pandora Sinks on Forecasts

Pandora Media Inc. (NYSE: P) reported third-quarter 2012 earnings after markets closed today. For the quarter, the Internet radio company posted adjusted diluted earnings per share (EPS) of $0.05 on revenues of $120 million. In the same period a year ago, the company reported EPS of $0.02 on revenues of $75 million.Third-quarter results compare to the Thomson Reuters consensus estimate for EPS of $0.01 on $117 million in revenues.

On a GAAP basis, the company reported diluted EPS of $0.01. Adjusted earnings excluded $7.1 million in stock-based compensation expense. In the same period a year ago, stock-based compensation expense totaled $2.7 million and GAAP EPS were break-even.

The company’s CEO said:

This quarter exceeded our expectations as we monetized mobile at record levels and grew total mobile revenue 112%.

Unfortunately, the press release does not attach a dollar amount to that doubling of revenue.

For the fourth quarter, Pandora guided revenue at $120 to $123 million and an adjusted EPS loss of $0.06 to $0.09, again attributed to stock-based compensation expense. The consensus estimate called for revenue of $130.3 million and EPS of $0.02.

For fiscal year 2013, Pandora guided revenue at $422 to $425 million and an adjusted EPS loss of $0.09 to $0.12, once more attributed to stock-based compensation expense. The consensus estimate calls for EPS of $0.07 on revenue of $613.1 million.

Pandora’s advertising revenue grew more than 61% year-over-year to $106.3 million, while subscription revenue rose 52% to $13.7 million. Marketing and sales costs rose $1.7 million year-over-year and general and administrative expenses were up more than 4x.

The company’s shares were slammed last month on reports that Apple Inc. (NASDAQ: AAPL) was working on a competing product. The real problem for Pandora, though, is that its revenue stream is not growing fast enough, even without Apple as a competitor. This is not a good day for Pandora.

The company’s shares are down 19% in after-hours trading today, at $7.69 in a 52-week range of $7.08 to $15.25. The consensus target price for the shares was around $12.60 before today’s report.

Paul Ausick