Pandora Shares Plummet on Sour Fourth-Quarter Forecast
Pandora Shares Plummet on Sour Fourth-Quarter Forecast

Pandora Media's figures for the month of March show the Internet radio service's growth rate has remained strong since it went public in June.

Pandora now streams over one billion listener hours per month, up 88% from 567 million listener hours a year earlier, while its number of active listeners grew to 51 million from 32 million. Pandora defines active listeners as any listener who initiated an audio stream in the most recent 30-day period.

The company's year-over-year growth in total listener hours 99% in the company's fiscal fourth quarter ended January 31, 104% in the fiscal third quarter and 125% in the fiscal second quarter.

Even though the company now claims to have a 5.79% share of total U.S. radio listening (the company calculates this using data from Triton Media, Arbitron and the U.S. Census) there are some doubts it can match ad revenue to growth in listener hours and royalties. These concerns were heightened last month when the company missed analysts' expectations for the fiscal fourth quarter and lowered its guidance on the first quarter of fiscal 2013. The company's stock immediately fell over $3 as investors absorbed the news. BTIG analyst Richard Greenfield reiterated his $3.75 price target, saying the company's "fundamental problem is that they are not offering enough ads per hour, given the mix shift to mobile audio CPMs."

But many analysts still have price targets at or above Pandora's current trading price of $9.96. JMP Securities, for example, just initiated coverage with a $14 price target based on optimism the company can do better selling ads against its strong growth in users and listeners hours. "While fiscal fourth-quarter results and near-term outlook was disappointing, following a reset of financial expectations and an almost 30 percent stock price correction, if the company is able to improve its mobile monetization rate, we believe that the company represents an attractive risk versus reward investment."