Volatility is a way of life for most social media stocks. Pandora (NYSE: P) is finding that out the hard way today.
Shares of the Internet radio company are in an all-out freefall right now after its fourth-quarter earnings were far worse than expected. The stock has plunged 24% today, sending Pandora down to less than $11 a share for the first time since January 9. Prior to today’s decline, Pandora had climbed more than 42% in 2012.
Still, the company has never been profitable. While the company’s revenue improved last quarter, it was offset by increased operating costs, resulting in a whopping $8.2 million in net losses. Pandora expects that trend to continue this quarter as the company is projecting a loss of between 18 cents and 21 cents a share.
Pandora went public last June with an IPO price of $16 a share. After the recent losses, the social media stock has now fallen 41% since its IPO.
Pandora hasn’t been alone. Other big-name social media stocks went public to much ballyhoo last year only to come crashing back to earth since their debuts. Groupon (Nasdaq: GRPN) and LinkedIn (NYSE: LNKD) are two social media stocks whose IPOs were much-hyped last year. Like Pandora, each went public despite never being profitable. Not surprisingly, both stocks have since fallen below their first-day closing prices – also like Pandora.
On the surface, Pandora’s fourth-quarter numbers were good. Listening hours were up 99% from a year earlier, and the number of active users rose 62% to 47 million. But total costs and expenses were up 83% thanks in large part to $48.2 million in content acquisitions.
That was enough to spell doom for Pandora this earnings season.