Why Pandora Missed a Beat as SiriusXM Surged

Strength in the auto market, meanwhile, gives the company confidence in its financial picture. At the Monday confidence, Frear affirmed SiriusXM's full-year 2012 guidance and detailed to investors how the company expects each new dollar in revenue to contribute roughly 70% to earnings before interest, taxes, depreciation and amortization EBITDA in coming quarters.

Frear said SiriusXM expects 40% EBITDA margins when the business matures and spent a significant part of the company's presentation talking about how the company could use growing cash flow for acquisitions or, in the absence of a compelling deal, stock buybacks.

In contrast, Pandora shares fell nearly 20% in after-hours trading on Monday, after the company beat third quarter earnings estimates, but cut its full year guidance sharply as a result of content costs and ad market headwinds.

The Oakland, California company said it's 2012 loss will be between 9 cents to 12 cents a share, nearly doubling previous estimates detailed in August. Pandora also cut its sales outlook to $422 million to $425 million from as much as $432 million, forecasted earlier in the year.

While subscribers grew 85% in the quarter and mobile ad sales rose over 100, those figures weren't enough to offset content costs. Royalties paid to music labels now represent 55% of the company's revenue and continue to hinder Pandora's overall profitability. Royalty costs and uncertain ad revenue create an uncertain financial piscture for the company headed into 2013.

Yesterday's earnings didn't help. BTIG analyst Richard Greenfield took to Twitter to complain that Pandora wouldn't take analyst questions on its conference call Monday evening. "Pandora management chooses not to take our questions on their quarterly earnings call," wrote Greenfield on Twitter. He characterized the lack of a Q&A as 'frustrating."

"Despite the incrementally positive underlying fundamentals showing mobile revenue growth in excess of content cost growth, Pandora shares are likely range bound until the new year," wrote Credit Suisse analyst Stephen Ju, of Pandora's third quarter and lowered guidance.

Pandora did show some positives in third quarter earnings, including strong usage growth in November, continued acceleration in mobile ad revenue growth as desktop usage declined, according to Bank of America Merrill Lynch analyst Nat Schindler, who maintained a 'Buy' rating and $16 a share price target on the company in a note sent to clients.