Pandora Finally Feels Some Investor Love After Annus Horribilis

(Bloomberg) -- After a year of share-price losses, hedge-fund attacks and analyst criticism, Pandora A/S appears to have made its peace with the market.

Chief Executive Officer Anders Colding Friis promised to right past wrongs, pledged hefty investor returns and even managed to draw praise from analysts who had once been caustic in their assessment of his performance.

SEB analyst Kristian Godiksen, who just days earlier had cut his Pandora rating, said Tuesday’s presentation left him feeling “comfortable” with the company’s prospects. Management provided “more clarity on the building blocks on revenue growth and profitability,” he said.

Lars Topholm, a Carnegie analyst who last year suggested the Danish jewelry maker was becoming “uninvestable” even referred to one presentation during Tuesday’s capital markets day as “an inspiration.” Per Hansen, an analyst at Nordnet, said “Pandora is moving closer to investors and showing a more accommodating stance than it has in the past.”

Pandora Soars as CEO Reassures Owners the Worst Is Behind Them

Speaking to reporters, the CEO said he felt he had managed to connect with the company’s investor base. “I think we had a good dialogue,” he said.

The shares gained as much as 6.4 percent at one point on Tuesday, topping Europe’s Stoxx 600 index. The stock rose again after trading started on Wednesday. It’s a rare victory after a year in which the company lost 27 percent. The stock slumped 11 percent last Thursday alone, after management told investors it wouldn’t quite live up to its 2017 goals and warned that profit growth was set to slow through 2022.

The CEO acknowledged 2017 had been marred by “hiccups” and said there are “things we can do better.” He also made clear Pandora will “expect to return quite a lot of cash to our shareholders” in 2018-2022.

Pandora Is Reviewing Split Between Dividend, Share Buybacks

Pandora’s chairman, Peder Tuborgh, said the company has learned its lessons after last year, which was characterized by a communications strategy that some analysts said left too many gaps. That meant market expectations were often out of step with reality, the criticism went. Tuborgh said “we have a clear view of the challenges we faced in 2017.” The board is now “confident” Pandora will be able to deliver on its new targets.

Pandora’s Heyday

Pandora used to be a stock-market darling, consistently exceeding its guidance. Its shares jumped 17-fold in the five years through 2016 as management beat market expectations quarter after quarter and revenue and net income both tripled. But as the company has grown, Friis has tried to make the point that a bigger base means slower growth.

Hedge Funds

Some hedge funds betting against the company have recently cashed in on their short positions. Lone Pine Capital and Coatue Management both reduced their bets after last week’s selloff.

But other funds joined the speculation against Pandora. BlackRock Investment Management placed its first official short bet last week. Indus Capital Partners also created a short position, according to a regulatory filing late on Friday. (The regulator only discloses changes in positions for funds that short at least 0.5 percent of a company.)

Hansen says hedge funds shorting Pandora “will presumably remain a large uncertainty factor.” Speculators are short about 12 percent of the shares, according to data provided by IHS Markit. Roughly a year ago, that figure was closer to 1 percent.

Aside from a challenging U.S. retail market, Pandora said a lack of product innovation has been problematic, according to its investor presentation on Tuesday.

Pandora said on Tuesday it will provide guidance specifically for 2018 on Feb. 6, when it publishes fourth-quarter results. As in previous years, the company will add to shareholder returns by buying back its own stock.

Pandora Sees 2018 Financials in Line With 5-Year Strategy Goals

Frans Hoyer, vice president of equity research at Jyske Bank, said it’s understandable for management to have been a bit “gun shy” in presenting its 2022 plan. But the company’s new targets are more credible than previous goals, he said.

“This is more a promise than a vision and something that Pandora’s management is certain it can achieve,” he said. Asked to comment on how the company handled the investor day, Hoyer said he thought it “did a fine job.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net.

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net.

©2018 Bloomberg L.P.