NEW YORK (AP) — Shares of Pandora Media Inc. lost a quarter of their value Wednesday as one analyst said he was worried about rising costs and the company's ability to make money from the mobile version of its popular online music listening service.
Pandora on Tuesday posted a slightly wider fourth-quarter loss than Wall Street analysts had expected. And the Oakland, Calif., company surprised investors with forecasts for the current quarter and year that were significantly worse than analysts' predictions.
Pandora went public in June at $16 per share, one of several high-profile Internet companies to launch initial public offerings last year. It makes money from subscriptions to its Internet radio service and advertising.
The company is adding more listeners. But it's taking longer than expected to make money from its increasingly popular mobile service, said Citi analyst Mark Mahaney. The longer-than-expected timeframe, coupled with Pandora's rising content costs, is a problem, he added. Mahaney cut his rating for Pandora to "Neutral" from "Buy." He also slashed his price target on the shares by $8, or 32 percent, to $17.
Pandora said it's second only to Google in mobile ads, posted $100 million in mobile ad revenue in fiscal 2012 and it is in a good position to take advantage of growth in the in the market.
Pandora expects a loss of 18 of 21 cents per share on revenue of $72 million to $75 million for the current quarter, which ends in April. Analysts polled by FactSet had forecast a loss of 2 cents per share on revenue of $86.5 million.
The company also expects a loss for its fiscal year ending in January 2013, while Wall Street analysts had been hoping that the young Internet radio provider would finally be able to turn a profit, of 3 cents per share. The annual revenue forecast fell short as well.
Pandora shares dropped $3.41, or 24 percent, to $10.86 in midday trading Wednesday.
Separately on Wednesday, Pandora said it would begin releasing on a monthly basis its key audience metrics such as the number of active users, listener hours and its total share of the U.S. radio audience, in order to give its advertisers accurate and timely information on its audience.