Pandora (P) investors are hoping for a reversal of fortune when the company reports second-quarter earnings after the ring of the closing bell on Thursday, July 23.
Although web-based music streaming services continue to be wildly popular, you wouldn’t know that by the Pandora stock price, which is off more than 20% in 2015 and down nearly 50% in the last year.
While the steep selloff has been painful for Pandora stock bulls, the pullback has attracted of a handful of analysts, who are touting P stock as an undervalued play in the tech/media space.
Canaccord Genuity analyst Michael Graham is among those calling attention to Pandora’s attractive valuation, reiterating a $26 price target and “buy” rating on Pandora stock.
Let’s take a look at what Wall Street expects from Pandora earnings and how the P stock price could be affected when the numbers come out late Thursday.
Pandora Stock by the Numbers
Analysts are calling for earnings of 2 cents per share in the fiscal second quarter — half of the 4 cents P stock earned in the year-ago quarter. Revenue is expected to jump 29.4% to $283.2 million.
Although Pandora stock is heavily covered — 31 analysts have ratings on its shares — it still occupies the purgatorial space where slim profits one quarter are followed by narrow losses the next. The most bearish analysts expect P stock to lose 5 cents per share in the second quarter while the most optimistic are calling for positive EPS of 7 cents.
Aside from EPS and revenue figures, a much-watched metric with P stock is its listener hours, which various analysts expect to rise between 9% and 11%, depending on who you ask. A 9% rate of growth would put total listener hours around 5.5 billion in the quarter.
Of course, the longer-term risks to the Pandora stock price remain the same: Obviously, Pandora is facing increased pressure from competitors like Spotify, Google (GOOG, GOOGL) and Apple (AAPL). But its rate structure is the real elephant in the room. The Copyright Royalty Board (CRB) is due to make a decision on whether Pandora will have to pay royalties as a digital broadcaster, or the much lower rates that traditional terrestrial broadcasters pay. That decision is due by December 2015.
Taking a step back, it’s important for investors to look at the long-term picture. Though Pandora is a leader in the growing world of streaming music, the whole “growth” story isn’t playing out very well, to put things gently. Just a few years ago, revenues were growing at 100% per year, but sales were up just 40% last year, and revenue is expected to grow by merely 29% this year.
Moreover, with the CRB decision looming large over Pandora’s future — and with no reliable way to predict what that decision will be — the company’s fate is largely outside of its own hands.
As of this writing, John Divine was long shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
