Pandora Shares Down

Pandora shares recently plummeted more than 35 percent following the company’s release of third quarter results, and analysts have attributed the decline to increasing competition in the market.

The internet radio company and new owner of Ticketfly announced Oct. 22 that quarterly revenue grew 30 percent year over year to $311.6 million, advertising revenue was 30 percent year over year to $254.7 million and subscription revenue increased 26 percent during the period to $56.9 million.

Company CEO Brian McAndrews announced during an investor call that the company “more than held its own for users and hours growth” in a quarter where “a large new entrant came into the music streaming landscape.”

“We aggressively invested to deliver long-term growth and cement Pandora’s leadership in music,” McAndrews said. “Our acquisition of Ticketfly will be truly transformative, extending our long-standing strength in music discovery to the large and fast-growing world of live events.

“Additionally, with our pre-1972 settlement, we are continuing to strengthen our relationships across the music landscape by resolving an historic source of tension,” he continued. “This progress points to a greater opportunity to work collaboratively toward a bright future for music in a digital era, those who make it, and the fans who love it.” McAndrews also downplayed the launch of Apple Music in June, noting Pandora wasn’t “seeing any meaningful listener impact” during the quarter.

“The impact on our active users and listening hours was muted and was, in fact, consistent with what we experienced during the launch of Apple’s radio service in 2013,” he said. Investors weren’t buying it, however, sending company stocks into a sharp decline the day after the report. Analysts told the New York Times the plunge indicated market uncertainty over Pandora’s standing against newer players in the streaming market like Apple, Spotify and YouTube, which just recently introduced a subscription plan that will include music.

“The fear from the investor world is that there is going to be a continued battle to fight for users,” BTIG Research media analyst Richard Greenfield told the paper, “and that will depress what is already is not much cash flow even further. … Historically, Pandora’s marketing was viral; it marketed itself. Now because there is so much competition, to generate the same level of revenue, they have to spend more to get there.”

The Motley Fool’s Steve Symington also weighed in on the matter, noting one “concerning” detail in Pandora’s report – a decline in the number of active listeners.

“Arguably more concerning was the fact Pandora’s number of active listeners rose a modest 2.1 percent year over year to 78.1 million, and declined sequentially, from 79.4 million active listeners last quarter,” Symington wrote.

But he was optimistic for the future of the company, adding he is “inclined to trust Pandora management that the influence of competitors will be short-lived, and its moves to bring royalties to a more predictable state will ultimately pay off.”