Investors slammed Pandora Media Inc., sending shares down as much as 21% in after-hours trading, when the Internet radio company reported a wider-than-expected loss for its fiscal fourth quarter and projected that revenue would decline in the current quarter.
The stock had closed at $14.27 a share, down 39 cents, in regular trading. After the Oakland Internet radio company reported its results, its shares fell to as low as $11.22 after hours.
Pandora's losses widened to $8.2 million for the quarter that ended Jan. 31 from a loss of $1.4 million a year earlier when it was a private company. The company went public last June. Quarterly sales rose 71% to $81.3 million from $47.6 million.
But sales may have hit a peak for now. The company projected that revenue this quarter would drop as much as 11% from the fourth quarter to a range of $72 million to $75 million. But that's still ahead of last year's fiscal first quarter sales of $51 million.
Pandora receives about 90% of its revenue from advertising, with the remainder coming from subscribers who pay $36 a year for the ad-free premium service.
"Everyone is asking, 'Why is revenue so low? Why are they losing so much money?'" said Michael Pachter, a media analyst with Wedbush Securities. "The answer is that they weren't focused on selling ads."
Instead, Pandora focused on persuading car manufacturers to build its Internet music streaming service technologies directly into the dashboard of new cars, Pachter said.
Believing that the way to grow is to capture listeners while they are in their cars, Pandora has worked closely with Ford Motor Co., Toyota Motor Corp., Mercedes-Benz and other automakers to include its service in new vehicles. But car manufacturing cycles take years, and Pandora's efforts may not bear fruit quickly enough for impatient investors.
Pandora stock debuted June 15 at $16 a share but sank to $13.26 the following day.