Pandora shares soar on earnings, CEO leaving

Mike Snider, USA TODAY | USATODAY

Pandora CEO Joseph Kennedy Thursday says he plans to step down.

"My heart is still 100% in Pandora," he said in a conference call with analysts and journalists Thursday to announce the online music-service's earnings. "But as I approach the start of my tenth year, my head is telling me. It is time to get to a recharging station sooner rather than later."

Pandora shares soared more than 20% in after-hours trading Thursday after closing modestly higher during normal trading hours. If the stock hangs onto to the after-hours gains, it has rebounded 92% from its all-time low of $7.36 a share hit in mid-November. But it remains well below its all-time high of $19.02, set back in early July 2011 within days of the company's initial public offering.

The company's quarterly earnings beat Wall Street estimates. Pandora now commands 8% of all radio listening, the company says. Advertising revenue of $109 million, amounted to a 51% increase over the fourth quarter a year ago. Subscriptions and other revenue rose 74% to $16.1 million.

Wedbush Securites analyst Michael Pachter Remains neutral on the stock. They have a phenomenal service, but it is really hard to value a company that doesn't make any money. If you generate $600 million in revenue and only do $10 million in earnings is that really worth $2.5 billion because that is what the stock is trading as."

Kennedy leaving "is a big deal. Westergren is the founder but Joe has been the CEO ever since they went public," Pachter says. "He's smart and people like him."

In the earnings conference call, Kennedy said: "We have strong momentum especially with mobile monetization and a plan for the fiscal year that we are all excited about," Kennedy said.

Named CEO in 2004, Kennedy helped Pandora transform from a music technology company co-founded by chief strategy office Tim Westergren into a consumer-based radio product that launched on the web in 2005.

Kennedy said he will remain CEO, chairman and president and help his replacement transition "no matter how long that process takes."