Pandora’s Earnings Likely To Feature Subscription Growth And Higher Advertising Revenues

Leading internet radio service Pandora (NYSE: P) will release its Q4’16 and full year earnings on February 9th. Pandora’s revenues for the first nine months rose by around 20% but fell short of the company’s guidance because of softness in the advertising industry, which is the major source of revenue for the company. The gross margin fell by over 100 basis points because of higher cost of content acquisition along with an addition of the lower margin Ticketfly business.

Q4’16 has been a roller coaster ride for Pandora’s stock price which initially rallied due to the rumors regarding its potential acquisition by SiriusXM (NASDAQ: SIRI). It then fell after these rumors were squelched by SiriusXM before surging again recently when the company hinted that it will beat its guidance for the fourth quarter.

See our complete analysis for Pandora

Here are the two key factors that can affect Pandora’s Q4 and full year results:

1. Advertising Revenues – During a press release in January, the company has reported that its advertising revenues in Q4 had benefited from the increase in advertising RPM (ad revenues per 1000 listening hours). This figure can be close to $60.00 given that ad RPM was $58.10 in Q3.
2. Number of Subscribers – Since the release of Pandora Plus with new features at the end of third quarter, Pandora has added 375,000 new paid subscribers to its ad-supported service, to bring the total number of such subscribers to 4.3 million.
   

Apart from this, we will be on the lookout for any information about ‘Pandora Premium’ in these earnings call, which is the on-demand music service by Pandora expected to be launched in Q1’17. It will compete directly with Spotify’s and Apple Music’s on-demand service, and also has a similar pricing structure of around $10 per month. It has been mentioned in the press, though the company has yet to release much information.

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