Axiom: Buy The Post-Earnings Weakness In Pandora

Pandora Media Inc (NYSE: P) reported its 2Q revenue results and announced its 3Q revenue guidance short of expectations. Axiom’s Victor Anthony maintained a Buy rating on the company, with a price target of $16. The analyst commented that Pandora’s differentiated on-demand service would soon be launched and recommended buying the stock on post-earnings weakness.

Pandora reported its 2Q revenue at $343M, representing 20 percent y/y growth, but missing the Axiom estimate of $346.1M and consensus of $351.7M. The shortfall was on account of a miss in ad revenue and subscription revenue, partly offset by Ticketing revenue.

The company’s 3Q revenue guidance range was 2-5 percent lower than consensus, while the midpoint of its EBITDA guidance was $4.4M short of consensus.

What’s Next?

“One positive was that listener hours continue to grow and so does listener engagement,” analyst Victor Anthony wrote. He added that the company remained on track to launch its on-demand service in 4Q, and could likely convert 4M users within the first year, “and do so cost-effectively.”

Despite the disappointing results and guidance, the core business seems to have “room to increase monetization,” Anthony stated. He added that there were also “multiple potential suiters who would find Pandora’s rich technology, UI, and large user base attractive.”

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