Pandora Media Inc (P), Sirius XM Radio Inc (SIRI), Apple Inc. (AAPL): What About That Other Guy?

Page 1 of 2

Pandora Media Inc (NYSE:P) is trading lower by 12% after posting its FQ2 earnings report. While the stock has doubled in 2013, and expectations were high, is the loss warranted, and is Pandora Media Inc (NYSE:P) a post-earnings buy?

What was in the quarter?

I’ve never been too high on Pandora Media Inc (NYSE:P), but as I gazed upon their numbers and read the quarterly report, I couldn’t help but to like their direction.

First off, revenue grew 58% year over year to $162 million and they posted an EPS of $0.04, both beating expectations. However, the weakness in shares was due to EPS guidance that was slightly below the consensus, and their decision to remove a 40-hour monthly mobile listening cap for free listeners.

Pandora Media Inc (NYSE:P)

Aside from top and bottom line performance, I found Pandora Media Inc (NYSE:P)’s content acquisition cost and its RPM to be very impressive.

The content acquisition cost is self-explanatory, showing how much Pandora pays for its content. In the quarter, it rose just 35% year-over-year. Back in FQ4 (two quarters ago) content costs were rising at 75% year-over-year. The 35% increase is a huge move in the right direction. Moreover, Pandora’s content is its highest overall cost, and I find it encouraging that revenue is outperforming this one cost.

RPM is the amount of ad revenue that Pandora creates per 1,000 hours of listening. Back in FQ1, the RPM was $25.31 for mobile, which was up 34% year-over-year. But for the most recent quarter, RPM jumped to $33.9, a significant acceleration, and a 53% rise over the previous year. This shows that Pandora is earning more money for its services.

While these facts are all encouraging, there’s another reason that I like the direction of Pandora.

What’s To Like?

As Pandora moves into vehicles, the comparison of it and Sirius XM Radio Inc (NASDAQ:SIRI) becomes more legit.

Back in June, Pandora Media Inc (NYSE:P) disclosed that its services were in 2.5 million cars, more than 100 models. According to Bloomberg, the local radio advertising market is valued at $15 billion annually, which is a space that Pandora had no presence in years prior.

Pandora’s 2.5 million car users is a long way from reaching Sirius XM Radio Inc (NASDAQ:SIRI)’s 25 million subscribers. However, Sirius has been the sole player in this space, but now faces the competition of Pandora, and we could find that Pandora steals significant share.

This brings me to my next point, with full-year revenue guidance of just $650 million, Pandora is still relatively small considering the size of its mobile, PC, and now auto market. On the other hand, Sirius has continued to grow as U.S. auto sales have exploded during the last four years. Yet, its year-over-year revenue growth is just 12% (last quarter), far below that of Pandora.

Despite Pandora growing five times faster than Sirius, Pandora Media Inc (NYSE:P) trades at 7 times sales and Sirius has a price/sales of 6.3. Therefore, both are valued similarly, although Sirius is highly profitable and Pandora is not. However, Pandora is entering a multi-billion dollar industry while Sirius faces a new competitor in its space. Hence, I believe that Pandora presents the better value and is cheaper relative to growth.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!