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What's in the Cards for Pandora Media (P) in Q3 Earnings?

Pandora Media Inc. P is set to report third-quarter 2017 results on Nov 2. In the trailing four quarters, the company has beaten the Zacks Consensus Estimate on three occasions and missed it once, delivering an average positive surprise of 15.06%.

Last quarter, Pandora’s loss per share of 21 cents was narrower than the Zacks Consensus Estimate of a loss of 23 cents but much wider than the year-ago quarter’s loss of 12 cents per share.

Revenues of $376.8 million beat the Zacks Consensus Estimate of $364.7 million and increased 9.9% year over year.

For third-quarter 2017, Pandora expects revenues in the range of $370–$385 million, reflecting 14% year-over-year growth rate at the midpoint.

However, the company has underperformed the industry on a year-to-date basis. While the industry gained 29.5%, Pandora lost 44.5% over the same time frame.

Let’s see how things are shaping up for this announcement.

 

Factors at Play

Pandora has been struggling to earn profits due to rising costs related to licensing, continuing expansion and higher operating expenses.

Reportedly, Pandora pulled out of Australia and New Zealand, its only two international markets, to counter rising costs and better focus on the services available in the United States.

As noted by management in the last conference call, active users from these two regions will not be counted in the third-quarter results. Thus, the number of active users is expected to decline in the third quarter.

Stiffening competition from the likes of Spotify, Tidal and Amazon AMZN is a big threat. Moreover, Pandora is a late entrant in the on-demand music services arena, which boasts big names like Spotify and Apple AAPL. Notably, Apple Music has been recording phenomenal growth.

However, advertising, subscriptions and ticketing services are expected to drive the top line. SiriusXM Holdings' SIRI investment of $480 million in Pandora and the sale of its loss making subsidiary, Ticketfly are also positives for the company.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pandora has an Earnings ESP of 17.12% but a Zacks Rank #4. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Pandora Media, Inc. (P): Free Stock Analysis Report
 
Sirius XM Holdings Inc. (SIRI): Free Stock Analysis Report
 
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