Pandora Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online radio company Pandora Media (NYS: P) plummeted 25% on Wednesday after its quarterly results and guidance disappointed Wall Street.

So what: Pandora's fourth-quarter revenue jumped an impressive 71%, but a loss of $8.2 million -- more than twice as a big as last year -- and a weak current-quarter outlook are triggering concerns over its long-term profitability. While the company continues to add listeners at a solid rate, disappointing mobile service revenue isn't keeping up with rapidly rising sales and programming expenses.

Now what: Looking ahead, management sees an adjusted first-quarter loss of $0.18-$0.21, well below the consensus of a $0.02 loss. Of course, Chairman and CEO Joe Kennedy reassured investors that Pandora "continues to rapidly disrupt the radio industry and has only just begun to realize the potential of our $37 billion U.S. market opportunity." Given the strong headwinds working against Pandora, however, I'd continue to be cautious about buying into that bull case.

Interested in more info onPandora?Add it to your watchlist.

At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.