Pandora Media Inc. (P) is set to report fiscal third quarter 2014 results on Nov 21, 2013. Over the last four quarters it has posted an average positive surprise of 150%. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Pandora reported an impressive second quarter of fiscal 2014. Although the company reported loss of 2 cents per share (in line with the Zacks Consensus Estimate and flat year-over-year), revenues improved 58.0% from the year-ago quarter to $162.0 million.
Mobile revenues surged 92.0% from the year-ago quarter to $116.0 million. This apart, the company also improved its monetization process, which is evident from a 31.8% year-over-year jump in total advertising revenue per thousand listener hours (ad RPMs) that aided results in the quarter. Moreover, listener hours improved 18.0% year over year to 3.88 billion in the quarter.
Active users jumped 30.0% to 71.2 million at the end of the quarter. Moreover, Pandora also raised approximately $400.0 million from its stock offering in September, which it expects to use for domestic and international expansion as well as for strategic acquisitions.
However, Pandora expects advertising revenue growth to slow down and lesser listener hours in the near future, particularly due to increasing competition. The company expects to continue to report losses in the near term.
Earnings Whispers?
Our proven model does not conclusively show that Pandora is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: That is because the Most Accurate estimate of break-even is lower than the Zacks Consensus Estimate of a penny. That is a difference of -100%.
ZacksRank #3 (Hold): Pandora’s Zacks #3 Rank (Hold), when combined with a negative ESP, makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
- Trina Solar Ltd. (TSL), Earnings ESP of +77.78% and a Zacks Rank #2 (Buy)
- TiVo Inc. (TIVO), Earnings ESP of +16.67% and a Zacks Rank #2 (Buy)
- Netflix Inc. (NFLX), Earnings ESP of +1.56% and a Zacks Rank#1 (Strong Buy)
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