Online streaming music service Pandora Media Inc (P.N) said it will remain in the red for at least another year, wiping nearly half a billion dollars off its market cap.
Ironically, the bigger Pandora's audience gets, the more it must pay record labels in licensing fees, hurting the mostly free radio service's chances of becoming profitable.
Initially known as SavageBeast, the company's mostly free service recommends different songs based on a listener's playlists.
It faces competition from the likes of traditional radio companies such as Clear Channel, satellite radio provider Sirius XM Radio Inc (SIRI.O), as well as Spotify, which allows users to integrate its streaming music through Facebook.
Major established companies such as Google Inc (GOOG.O), Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O) also offer popular music services.
Nevertheless, Pandora's top executive seemed undaunted and while the company has never made an annual profit, Chief Executive Joe Kennedy promised that the company had "just scratched the surface of a $37 billion U.S. market potential."
Kennedy told analysts on Tuesday that Pandora's radio market share in the United States of 5.5 percent -- up from 2.7 percent within the past year -- showed that it had evolved "from being not particular relevant to being very relevant" over the course of a year.
But that has yet to translate into earnings.
For the current quarter Pandora estimated an adjusted net loss of 18 to 21 cents per share, a far cry from the average analyst forecast of a loss of 2 cents according to Thomson Reuters I/B/E/S.
Kennedy said that the first quarter was traditionally sluggish as advertising spending at the start of the year was usually slow.
For the full fiscal year ending January 2013 Pandora, over a decade old, estimated a loss, adjusted for items, of 11 to 16 cents per share.
Pandora reported a record 71 percent rise in fourth quarter revenue and estimated fiscal year 2013 revenue of $410 million to $420 million, in line with the average analyst forecast of $418 million.
The company said it sees quarterly revenue of $72 million to $75 million versus analysts' average expectation of $86 million.
Pandora shares - which debuted at $16 when the company went public in June last year - fell to $11.24 in extended trading after closing 2.7 percent lower at $14.27 on the New York Stock Exchange.
"It looks like the Street is concerned with their guidance," said James Goss, analyst at Barrington Research.
Total listener hours grew 99 percent to around 2.7 billion in the fourth quarter and advertising revenue jumped 74 percent to $72.1 million.
"Our ad revenue on mobile devices quadrupled to over $100 million from $25 million," he said. "This places us second only to Google in mobile advertising."
For the time being Pandora was not planning to expand in Europe, where rival Spotify is hugely popular, Kennedy said.
Pandora said that fourth quarter revenue surged to $81.3 million from $47.64 million a year earlier. Analysts had forecast $83.1 million, according to Thomson Reuters I/B/E/S.
Pandora itself had estimated fourth-quarter revenue of $80 million to $84 million.
On a GAAP basis, it had a net loss of 5 cents per share. Adjusted for items the net loss was 3 cents per share.
(Editing by Richard Chang, Phil Berlowitz)