Pandora Media Inc. () is set to report FQ1 2014 earnings after the market closes on Thursday, April 24th. Pandora, one of the biggest players in streaming music, is expected to see a drop in % revenue growth compared to recent quarters. In each of the past 9 quarters Pandora’s revenue has grown on a year over year basis between 50% and 60%, but this quarter Wall Street is only looking for 37.5% growth. 37.5% revenue growth is no small feat, although Pandora is also expected to post a loss of 8c per share. Like many other tech stocks Pandora has gotten butchered since early March, company stock is now trading 27% lower than its March highs. Investors are not particularly bullish on Pandora compared to the Street this quarter either, here’s what they expect.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Pandora to report -8c EPS and $176.69M revenue while the current Estimize.com consensus from 32 Buy Side and Independent contributing analysts is -8c EPS and $177.03M in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Pandora to report in-line with Wall Street on EPS and beat expectations by a very small margin on revenue.
Over the previous 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting Pandora’s EPS and revenue 3 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing almost no difference between the two groups’ expectations.
The distribution of estimates published by analysts on the Estimize.com platform range from -2c to -18c EPS and from $170.00M to $185.00M in revenues. This quarter we’re seeing a very wide distribution of EPS estimates on Pandora and a slightly wider than usual distribution of revenue estimates.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings. Although the community in aggregate agrees that Pandora will report in-line with Wall Street, everyone seems to have a different opinion about what type of earnings number we will see on Thursday.
Over the past 4 months the Wall Street EPS forecast rose from -13c to -8c while the Estimize consensus crept up from -9c to -8c. Meanwhile the Wall Street revenue consensus remained relatively flat while the Estimize consensus came down from $204.19M to $177.03M. Timeliness is correlated with accuracy and at the end of the period we saw rising EPS expectations alongside falling revenue projections.
The analyst with the highest estimate confidence rating this quarter is WallStreetBean who projects -12c EPS and $175.76M in revenue. WallStreetBean is ranked 10th overall among 4,200 contributing analysts. Over the past 2 years WallStreetBean has been more accurate than Wall Street in forecasting EPS and revenue 50% and 46% of the time respectively throughout 1204 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case WallStreetBean is making a bearish call expecting WallStreetBean to miss both the Wall Street and Estimize consensus on EPS and revenue.
Contributing analysts on the Estimize.com platform are expecting Pandora to report numbers in-line with the Wall Street consensus. However, there is a very wide range of estimates on EPS which indicates uncertainty and could be a sign of coming volatility as investors adjust to how Pandora reported relative to their own expectations. This quarter the Estimize community expects solid revenue growth of 37.8% compared to last year, but only a 2c per share reduction in quarterly losses, which could be a sign of trouble in conjunction with slowing revenue growth.
Get access to estimates for Pandora published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.