Personalized music service provider Pandora Media Inc (NYSE: P) reported better than expected first-quarter results on Friday. Following the earnings report, the share price of the company closed at $9.01 on Monday. Even though the company reported a net loss, the analysts are quite optimistic about the future of the company due to the reasons discussed below.
In the fiscal 2016 first-quarter, the company’s revenue increased by 29% to $297.3 million. The Wall Street revenue estimate was $286.4 million. The company also met its revenue guidance in the range of $280 million to $290 million.
On a GAAP basis, the company’s first-quarter net loss was $115.1 million or $0.51 per share. The adjusted (non-GAAP) net loss for the first quarter was $45.2 million or $0.20 per share. The consensus estimate of analysts was a wider net loss of $0.32 per share.
Segment-wise, the advertisement revenue increased by 23% to $220.3 million. Subscription and other service revenue increased 5% to $54.7 million. Another positive surprise in the result is the “Ticketfly” (concert ticketing service) revenue of $22.3 million, which went past the analysts’ estimates of $17 million. The management is also optimistic about launching an on-demand music platform by the year-end.
The Oakland, California-based company stated that the number of active listeners increased 0.3% (y-o-y basis) to 79.4 million at the end of the first quarter. More importantly, the total listener hours increased by 4% to 5.52 billion during the quarter. Furthermore, on a y-o-y basis, the total revenue per 1000 listening hours (RPMs) increased by 14% to $49.84.
For the second quarter, the management anticipates revenue in the range of $345 million to $355 million. The midpoint of the given range, i.e. $350 million revenue represents a growth of $22.6% on a y-o-y basis. Pandora also raised its previous fiscal 2016 revenue outlook. For fiscal 2016, the company now expects revenue in the range of $1.41 billion to $1.43 billion, compared to the previous guidance range of $1.40 billion to $1.42 billion.
The company’s new features such as browse and Thumbprint Radio are expected to draw more revenue in the quarters ahead. Pandora’s CFO Mike Herring is also optimistic that last year’s CRB (Copyright Royalty Board) ruling would not only enable the company to have a definite view of its costs but also employ a perfect plan for sustained profitability. Considering these facts, fundamentally, the stock is expected to remain bullish in the weeks ahead.
The stock is on the verge of breaking above the 50-day moving average of $9.63. The next major resistance for the stock is at 13. On the downside, firm support exists at 8.80. The stochastic indicator is rising.
Thus, a one-touch call option contract would be the best choice for a binary options trader at this point in time. A target price of $12 or less would support the interest of the trader. It is also advisable to select the contract expiry date in the first week of June.
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