Pandora Media, the biggest Internet radio service, dropped in late trading after listener growth missed some analysts' estimates. Quarterly profit beat projections and the company raised its 2014 outlook.
Active listeners grew 7.5 percent to 76.4 million users in the second quarter, the Oakland-based company said Thursday. That was shy of the 76.6 million estimate of Corey Barrett, an analyst at Pacific Crest Securities, and a projection of 77 million by Mark Mahaney at RBC Capital Markets.
"Usage is stagnating, I think that's the fundamental challenge -- competition has been starting to take its toll," Rich Greenfield, an analyst with BTIG, said in a telephone interview. "That's going to scare the market for what's supposed to be a rapid-growth Internet company."
Larger companies are building services to compete with Pandora, such as Google's purchase of Songza Media and Apple's acquisition of Beats Electronics. The number of Pandora listeners and the amount of time they spend using the service is little changed on a monthly basis from December to June, said Greenfield, who rates the stock a sell.
The stock fell 10.5 percent to $25.70 in extended trading after the results were announced. The shares rose 4.3 percent to $28.72 at the close in New York.
Pandora expects to earn 5 cents to 8 cents a share on an adjusted basis in the third quarter, with sales of $235 million to $240 million. Analysts had projected 8 cents and $234 million.
For the year, the company projects 16 cents to 19 cents a share in profit, excluding items, up from the 14 cents to 18 cents it projected in April.
Second-quarter earnings came to 4 cents a share, excluding items. Analysts predicted 3 cents, the average of 27 estimates compiled by Bloomberg. Sales grew 43 percent $218.9 million. Mobile revenue rose 59 percent to $167.5 million. The company is among the top five mobile advertising platforms, with Google and Facebook in the lead, according to data compiled by Bloomberg.