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We expect Pandora Media, Inc. (P) to beat expectations when it reports first quarter 2014 results on Apr 24.
    
Let us see how things are shaping up for this quarter.

A Likely Positive Surprise

Our proven model shows that Pandora is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction, or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +5.26%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Pandora’s Zacks Rank #2 and +5.26% ESP makes us very confident of an earnings beat on Apr 24.

What Will Drive the Better-than Expected Earnings?

Pandora’s growing user base is a major positive. Per the latest audio metrics, Pandora’s listener hours for Mar 2014 were up 14.0% on a year-over-year basis. Also, the share of total U.S. radio listening went up to 9.1% from 8.1% reported in the year-ago month. Additionally, the number of active listeners went up 8.4% on a year-over-year basis.

Improving monetization and strong mobile growth will drive the top line. However, rising costs related to licensing will remain a headwind in the near term. Moreover, higher operating expenses are expected to hurt profitability in the near term.

Nevertheless, we believe that Pandora’s popular service, driven by its effective discovery engine and a well-established infrastructure, places it well to compete against the likes of Apple (AAPL), Spotify and Sirius XM (SIRI).  

Other Stocks to Consider

Pandora is not the only firm looking up this earnings season. We also see a likely earnings beat coming from On Semiconductor Corp. (ONNN), which has an Earnings ESP of +6.67% and a Zacks #1 Rank (Strong Buy)

 
APPLE INC (AAPL): Free Stock Analysis Report
 
ON SEMICON CORP (ONNN): Free Stock Analysis Report
 
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SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report
 
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