Why Pandora Shares Boomed

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 Internet radio service Pandora Media soared 19% today after the company's quarterly results and guidance topped Wall Street expectations.

So what: The company's fourth-quarter loss widened to $14.6 million, but a 54% spike in revenue, coupled with upbeat guidance for the full year, suggests that management's growth strategy is right on track. Of course, that makes Pandora's other big announcement that longtime CEO Joseph Kennedy will be leaving the company all the more confusing to investors.

Now what: For the full year, management now sees adjusted earnings ranging from a loss of $0.05 per share to a profit of $0.05 per share on a revenue range of $600 million to $620 million. "Pandora has been hiring top talent in local radio markets to further increase our share of the $15 billion radio ad market," said Kennedy in a statement. "We are now effectively the largest radio station in almost every major market and begin fiscal year 2014 with extraordinary momentum." However, when you consider the fact that Kennedy won't be there to channel that momentum into long-term profitability, I'd wait for some of the exuberance to fade before buying into that bullishness.

Pandora has won millions of devotees among music fans but few supporters on Wall Street. The online jukebox seems to be redefining the way we consume music, a transformation that's only likely to grow. But high royalty rates and competition from all corners threatens to silence the company. Can Pandora translate success with its listeners into a prosperous business model that will deliver for investors? Learn about the key opportunities and potential pitfalls facing the upstart radio streamer in The Motley Fool's new premium research report. All you have to do is click here now to subscribe to this invaluable investor's resource.

The article Why Pandora Shares Boomed originally appeared on Fool.com.

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