Pandora Earnings Preview: Expecting Another Weak Quarter

Pandora is scheduled to release its Q3 fiscal 2016 earnings on October 25th and although there will likely be a notable growth in revenues, the company is likely to remain in the net loss position. Pandora’s monetization has been improving consistently, driving revenues upwards and we expect this trend to have continued in the recently concluded quarter. However, we expect a significant decline in the company’s EBITDA for the third quarter, on account of the recent increases in royalty rates (0.02 cents per performance) and surging sales and marketing costs.

Also, we will keep an eye out for updates on Pandora’s recently launched on-demand music subscription service. Details around the initial response to this feature can greatly help in assessing the company’s potential future as a subscription-based service. Pandora has traditionally relied on advertisements for a bulk of its revenues, which haven’t been enough to counter its burgeoning content and sales and  marketing costs. Although the Internet radio company did have the subscription side of the business, its limited song library along with radio station format of listening (unavailability of on-demand music) could never really convince users to pay for ad-free services. With the on-demand service, the company can hope to bolster its subscriber base, thereby increasing its monetization.

Have more questions about Pandora? See the links below:

• By How Much Have Pandora’s Revenue & EBITDA Increased In The Last Five Years?
• How Has Pandora’s Revenue Composition Changed In The Last Five Years?
• What’s Pandora’s Fundamental Value Based On Expected 2016 Results?

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