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Pandora Media Inc beat 3Q estimates; analysts say SiriusXM should up the ante on its acquisition

SiriusXM announced its plans to acquire Pandora in a $3.5 billion all-stock deal, but Wedbush analysts don't think shareholders will accept the current price in light of recent results
Pandora app on a phone
The streaming giant added 784,000 subscribers in the quarter, reaching a total of 6.8 million

Pandora Media Inc (NYSE:P) announced better-than-expected third-quarter results, but its number of active users and total listening hours weren’t in tune with last year’s stats.

The streaming giant reported a net loss of $0.06 per share on revenue of $417.6 million compared with a net loss of $0.06 per share on revenue of $378.64 million in the previous year’s third quarter.

The California-based company topped Wall Street estimates of a net loss of $0.11 per share on revenue of $401.29 million.

Shares of Pandora were up more than 2% to $8.86 in Tuesday pre-market trading.

READ: Pandora's $3.5b takeover by Sirius XM is unlikely to be approved by Pandora shareholders, says Wedbush

Active users totaled 68.8 million, lower than the 73.7 million reported in its previous third quarter.

Pandora users racked up a total of 4.81 billion listening hours, falling short of the 5.15 billion listening hours a year ago.

The company added 784,000 paying subscribers in the quarter, reaching a total of 6.8 million subscribers.

Subscription revenue increased by 49% to $125.8 million while ad revenue totaled $291.9 million.

Pandora closed its strategic partnership with SoundCloud, which will use Pandora as its exclusive advertising and sales representation in the US, boosting Pandora’s ad reach to more than 100 million listeners.

SiriusXM recently announced its plans to acquire Pandora in an all-stock deal valued at $3.5 billion.

“Looking ahead, I couldn’t be more excited about Pandora joining forces with SiriusXM. A combined Pandora-SiriusXM will create the world’s largest audio entertainment company, bringing Pandora additional resources to accelerate growth and building on SiriusXM’s leadership in the car, subscription expertise, and unique content,” said CEO Roger Lynch in the company’s press release.

Pandora plans to host “Beyond 2018”, a free concert on November 13 at Terminal 5 in New York City featuring performances by Cardi B, Julia Michaels, DaniLeigh and DJ Big Ben.

An analyst weighs in

Wedbush analysts foresee profitability on the horizon as soon as the fourth quarter, putting pressure on Sirius XM to up the ante on its acquisition.

“We don’t expect Pandora shareholders to approve the acquisition by SiriusXM as currently contemplated by the two companies, as the fixed exchange ratio results in a significantly lower purchase price per share than originally envisioned by SiriusXM and Pandora,” wrote Wedbush analysts.

The analysts expect an activist investor to seek an increase on the price of the deal, possibly at a fixed price of $10 per share or higher.

While Pandora did not provide an estimate for its fourth-quarter results, the analysts expect revenue of $453 million and adjusted EBITDA of $20 million, above its prior estimate of $446 million in revenue and adjusted EBITDA of $15 million.

Wedbush reiterated an Outperform rating with a price target of $10.

--Updated to reflect analyst commentary and recent share price

 

Contact Lenore Fedow at [email protected]

Follow her on Twitter@LenoreMariee

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