Is Pandora Media (P) Likely to Surprise this Earnings Season? - Analyst Blog
Pandora Media Inc. P is set to report first-quarter fiscal 2015 results on Apr 23. Last quarter, the company posted a negative earnings surprise of 33.33%, which led to average negative earnings surprise of 23.47% over the past four quarters.
Let us see how things are shaping up for this announcement.
Factors to Consider
Higher advertising revenues and Subscription service are the current growth drivers for Pandora. In addition, we believe improving monetization and strong mobile growth are the other positives that could drive first-quarter earnings. We expect that the company will benefit from the growing listening hours, market share gains and introduction of the new music recommendation unit, Promoted Stations.
We believe that improving listening hours is necessary for subscriber base growth, the primary revenue source for Pandora. The company's plan to launch service in cars is another positive move in this regard as it has ample growth opportunity. Its partnerships with Ford, Holden and Mazda in Australia expand its service in the region, which will boost ad revenues, going forward.
Nevertheless, slowing monthly subscriber base remains a major headwind amid intensifying competition, in our view. Moreover, rising costs related to licensing is likely to hamper first-quarter results. Additionally, higher operating expenses are expected to hurt profitability, going forward.
Earnings Whispers
Our proven model does not conclusively show that Pandora is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Zacks ESP: Pandora currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 27 cents.
Zacks Rank: Pandora has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Apple Inc. AAPL, with an Earnings ESP of +1.38% and a Zacks Rank #2 (Buy).
Amazon.com Inc. AMZN, with an Earnings ESP of +175.00% and a Zacks Rank #3.
Akamai Technologies, Inc. AKAM, with an Earnings ESP of +1.96% and a Zacks Rank #3.
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