Can Pandora Media Inc (NYSE:P) box its profits in for good?

Posted by George Brook July 22, 2013 0 Comment 1223 views

Since 2011, Pandora Media Inc (NYSE:P)’s stock has been on a veritable roller-coaster ride. It had debuted in the most potent IPO market since the “dot-com” era. Since its initial $16 offering, the company shares have risen close to 15% but over the last one year, they rode 100% higher. So is this then an indication that the company is riding on a long-term success wave or is the last year’s current nothing more than a passing current?

Noteworthy facts

The company had announced its Q1 earnings at the end of 2103 May and had posted a $0.16 net loss. However, P also reported total revenue of $125.5M which was 55% above the revenue from the same quarter in 2012. There was an increase of 700,000 subscribers to the “Pandora One” premium service. This exceeded the 2.5M mark. In addition to this the company reported that there was a 49% rise in advertising revenue. On the other hand, there was a 48% rise in content costs and a R&D and marketing costs in combination, rose by 75%.

Mobile revenue growth almost doubled to $83.4M and was definitely a notable one. Largely, analysts are optimistic that Pandora will be able to hold forth on its profitability streak over the following quarters.

Technique and technicality

From a technical viewpoint, Pandora stock has performed very well over the last one year.

The reason for doubt then is that the company has not been able to show that its business model has long-term sustainability. In four out of the last five quarters, its EPS figures have been in the negative. Even as biggies like Apple and Google make an appearance on the internet radio landscape, Pandora will have to up its R&D and marketing budgets even more. This is bound to result in an erosion of margins. Pandora will have to demonstrate several quarters of consistent profitability for it to keep investors interested.

About George Brook

George Brook covers money and politics for GDP Insider. George is a veteran journalist who has also covered Congress, national political conventions and presidential politics. George also covers the White House as well as economic and domestic policy for GDP insider. George's reporting has won numerous awards, including two Scripps Howard awards, two National Headliners, two Gerald Loeb Awards, as well as honors from Sigma Delta Chi and the National Press Club.

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