Pandora Subscriptions Climb, Outlook Upbeat For Revenue

Investor's Business Daily

Pandora Media topped sales expectations on subscription and mobile growth late Thursday and offered upbeat revenue guidance despite the threat of competition by some tech giants.

The Oakland, Calif., online-radio company met views with a 10-cents-per-share loss excluding items, according to analysts polled by Thomson Reuters. It lost 9 cents a year earlier.

Non-GAAP revenue climbed 58% to $128.5 million, beating the $124 million expected.

Pandora Media (P) expects Q2 sales from $155 million to $160 million, above the $150 million consensus. It sees full-year revenue at $615 million to $635 million vs. views for $618 million.

Pandora rose 9% in late trading. During the regular session, shares climbed 4% to a 52-week high, up 87% for the year.

Pandora relies on advertising for most of its revenue, as the service is free for most users. Ad revenue climbed 49% to $105.1 million. But revenue from ad-free subscriptions did jump 114% to $23.4 million.

Mobile revenue climbed 97%.

Mobile listening hours jumped 47%. Overall listening climbed 35% to 4.18 billion hours. That's despite a 40-hour-a-month free music limit imposed during Q1.

Competition has been growing. Google (GOOG) beat Apple (AAPL) to market this month with an online music subscription service. But observers say newer streaming music services likely won't kill Pandora's business.

"The Google and Apple threat lingers, but large corporations historically haven't competed well with Pandora," said Albert Fried & Co. analyst Rich Tullo.

Music streaming is a hard business to get into because it requires complex deals with music producers and federal overseers, Tullo says. Apple hit snags in negotiations, delaying the launch of its service, according to the New York Times. Apple didn't return a request for comment.

Google's All Access $9.99-a-month streaming feature is not a direct rival to the free Pandora service, says Wedbush analyst Michael Pachter.

"Anything that takes away user listener hours is going to affect Pandora, but (Google's service) is not the same product," said Pachter. "Most of us consume music in a variety of ways.

Still, it's clear Google sees itself competing with Pandora. When Android Engineering Director Chris Yerga unveiled the product, he stressed the ability to alter radio playlists — a feature that ad-supported Pandora lacks.

"If there's something there we don't want to hear, swipe it away," Yerga said. "You can also reorder tracks in the queue. This is radio without rules."

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