Pandora sort of bounces back after months of chaos

August 20, 2018

Pandora is probably breathing a small sigh of relief after months of chaos have still ended with a positive second quarter, sending the shares up more than 7 percent in extended trading.

Pandora has certainly had an interesting second quarter, capping off the drama with CEO Tim Westergren stepping down at the end of June. It also sold Ticketfly at a pretty big loss, pondered selling a big stake in the company to private equity firm KKR with some weird terms and then finally took a massive $480 million investment from SiriusXM. An outright sale of Pandora, for now, seems off the table after some consideration and that massive investment.

The company managed to eke out a slightly better-than-expected quarter following that mess, today posting a loss of 21 cents per share on revenue of $376.8 million. Wall Street was looking for a loss of 24 cents per share on revenue of $368.9 million. The companys advertising revenue grew 5 percent year-over-year, while its subscription revenue was up 25 percent year-over-year. Advertising revenue still comprises the majority of the companys revenue.

Still, in very Pandora fashion, the companys stock came back to earth later during the companys earnings call to discuss its second quarter results. The company went negative midway through the call.

The companys listener hours one of its main metrics of success were down year-over-year to 5.22 billion hours in Q2. Last year, the company said users listened to 5.66 billion hours of music. Pandoras explanation here was that listener hours were actively managed this quarter to optimize profitability in our ad-supported service. Pandora said it has 76 million active listeners as of the end of the second quarter this year.

Anyway, things havent gone well for the company for the entire year. The company also pulled out of Australia and New Zealand, sending the stock down before the company reported its earnings today. Pandora has seen its total value fall off by one-third as more and more uncertainty builds around its future. To the chart!:

Pandora is facing a laundry list of issues. The most obvious one is that its core business the one that turned it into a publicly traded company and made it one of the first breakout smartphone apps is quickly being commoditized. Spotify, which showed off some impressive growth metrics, has picked off the on-demand section while Apple Music is basically on its way to locking down the universe of listeners on the iPhone.

Theres also the licensing problem. Digital music companies face a lot of pressure because of the costs of licensing music. Its not just a Pandora problem Spotify has also seen some issues here but its one that in the end is partly keeping Pandora from generating the cash that it needs to invest in developing and growing its audience.

Still, anything greater than zero is positive, and its something that Pandora likely needed as it heads into (yet another) uncertain quarter trying to solve the business of an online radio.

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