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What Is the Outlook for Pandora?

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Updated

Total listener hours

Pandora Media (P) had total listener hours of 5.4 billion in 4Q15, a 3% increase over 4Q14. In fiscal 2015, Pandora had total listener hours of 21.1 billion, up by 5% over fiscal 2014.

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Active listeners

The company had an active listener base of 81.1 million in 4Q15, down by about 0.4 million from the same quarter last year. Pandora is facing increasing competition from Apple Music (AAPL), which has around 10 million subscribers, and Spotify. Alphabet’s (GOOG) YouTube also launched a free YouTube Music app in November last year that is also available with a YouTube Red subscription.

Fiscal outlook

Pandora expects revenues in the range of $1.4 billion to $1.42 billion in fiscal 2016 with an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $80 million to $60 million. In fiscal 1Q16, the company expects revenues to be in the range of $280 million and $290 million. It expects an adjusted EBITDA loss of $75 million to $65 million.

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Future outlook for core Internet radio business

Pandora expects that its core Internet radio business will have revenues of $2.4 billion in the next five years. It expects that its core Internet radio business will contribute substantially to a gross margin of around 40% in 2016. The company projects that its Internet radio business will have revenues of $1.3 billion in 2016 with EBITDA of $50 million.

Pandora expects a gross profit of $550 million in fiscal 2016. By 2020, the company expects to have a 20% operating margin.

Revenues from ticketing events

The company also foresees an opportunity to earn around $300 million in revenues in the next five years through ticketing sales for live events after its acquisition of Ticketfly. Pandora acquired Ticketfly for $450 million in October last year.

As the chart above shows, Ticketfly had an average ticket price of $37.11 in the first nine months of 2015, a rise of 4% from $35.54 in the first nine months of 2014.

Pandora hopes to leverage Ticketfly’s data analytics to connect Pandora’s active users to live events. The company expects revenues in the range of $80 million to $90 million in 2016 from ticketing live events.

Content costs

The company expects content costs to be up by about $160 million in 2016 compared to 2015 as a result of new publishing deals and its pre-1972 settlement with record companies.

Pandora Media makes up 0.02% of the iShares Russell 1000 Growth Index (IWF). IWF invests 2.4% of its holdings in Facebook (FB).

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