And how bad does it look? Yesterday’s posted loss pushed Aeropostale into the red, leaving the company with $22 million in losses racked up over the past 12 months. With no profits to its name, no dividend to its shareholders, and a projected growth rate even slower than A&F’s, at this point, there’s very little reason left to want to own Aeropostale shares.
Pandora Media Inc (NYSE:P)‘s profits don’t play
Last but not least, we come to Pandora Media Inc (NYSE:P). Yesterday, Pandora Media Inc (NYSE:P) reported earnings that, at positive $0.04 per share pro forma but negative $0.02 per share GAAP, either beat analyst estimates handily, or missed them quite badly. Whether the news was a beat or a miss depends entirely on whether you think companies need to hit a GAAP per-share target to qualify for a “beat,” or whether it’s enough to deliver mere “earnings before bad stuff” that matches analyst objectives.
Today, it appears that investors are leaning toward the former interpretation, and punishing Pandora Media Inc (NYSE:P) for a “miss.” Shares are currently down 12%, and still falling. This is despite the fact that Pandora reported a whole series of other numbers that didn’t look half-bad: Pro forma revenue from services delivered over mobile devices grew 92%, active users increased 30%, total listener hours were up 18%, and market share among radio listeners of all types climbed 106 basis points to 7.08%.
Analyst reactions to Pandora Media Inc (NYSE:P)’s news are decidedly mixed. According to StreetInsider.com, both Stifel Nicolaus and Raymond James are downgrading the shares to various flavors of “hold” this morning. Goldman Sachs and Canaccord Genuity, in contrast, are maintaining their “buy” ratings and raising their price targets — to $29 and $25, respectively.
Who’s right? Who’s wrong? I’m going to side with the investors today (and with Stifel and Raymond), and against analysts Goldman and Canaccord. For while adding users and increasing listener hours is all well and good, the fact remains that Pandora remains an unprofitable business, and one burning increasing amounts of cash. Trailing-12-month results show Pandora losing nearly $49 million, as negative free cash flow approaches the $22 million mark.
Long story short, Pandora’s business may be growing, but until it figures out a way to grow profits in tandem, I cannot recommend the shares.
Fool contributor Rich Smith owns shares of Abercrombie & Fitch. The Motley Fool recommends Pandora Media.
The article Friday’s Top Upgrades (and Downgrades) originally appeared on Fool.com is written by Rich Smith.
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