Language education software provider Rosetta Stone (RST) has been hit by a pair of downgrades this morning following what appeared to strong Q3 results after the close of trading yesterday afternoon.
Rosetta posted Q3 revenue of $67.2 million and profits of 29 cents a share, ahead of the Street at $65.6 million and 24 cents. Q4 guidance is for revenue of $72 million to $76 million and profits of 39-44 cents a share, which compares to the Street consensus at $74.5 million and 41 cents. At the midpoint of the guidance ranges - $74 million and 41.5 cents - the forecast looks a hair light.
Not good enough, apparently.
Jefferies analyst Ross MacMillan this morning cut his rating on the stock to Hold from Buy. “The company is experiencing a combination of deteriorating returns on media (that may or may not be transitory) and decelerating consumer unit volumes,” he writes. “While institutional and international are strong, they aren’t big enough to offset the slowing U.S. consumer biz yet.” He cut his 2010 EPS estimate to $1.20, from $1.28.
Likewise, Piper Jaffray analyst Mark Marostica cut his rating on the stock this morning to Neutral from Overweight, trimming his price target to $19, from $27. His 2010 EPS forecast drops to $1.11 from $1.26. The downgrade, he writes in a research note reflects his view that “the company’s consumer business appears to be slowing more markedly than previously anticipated.” He adds that “we lack visibility as to when consumers will be more receptive buyers of Rosetta Stone’s language learning products.”
The Piper analyst says there are signs of more cautious consumer behavior on buying the company’s software. Q3 average sales price per unit was up 12% year-over-year, down from an average 28% increase in the last six quarters. He adds that the company’s kiosk business saw a 4% year-over-year decline in revenue growth “given sluggish mall traffic and a budget-conscious consumer who is not eager to pony up a few hundred dollars for Rosetta Stone’s language learning products in the current economic environment.”
I just don't get it! Kiosk traffic will be much higher during the holiday seasons and maybe a good gift for the person themselves or another person. I think they are missing the boat here. Management should of raised guidance instead of being conservative and wanting to have a blow out quarter again. That got themselves into a downgrade! I blame management more then the analyst now! The CFO in August screw the shareholder dropping RST from $31 to $19 a share and now the top management being conservative drop the stock from $21.60 to $18.35 a share!
I have stock which are loosing money and have gone up on positive guidance and RST is making money and tanking at the same time! What gives here?
Analyst in London just said that this could be the tipping point of the market! He expects at least 10% correction but could be worse could give up all the gains since March and more! Look for RST to be $5 by end of the month!
DOW Future approaching 300 negative! Wow! I glad I invested a majority of my money here in a short position. At this rate; I would not be surprise if by opening; DOW future is down 700 and Nasdaq is down 150!
"US markets are bracing for a shakeup Friday after investors fled risk assets globally on concerns about Dubai's debt rescheduling."
Currently DOW futures down over 200 points! "Worldwide sell off shakes major markets" Oh my! ha! ha! RST!
I got up and was not sleepy and say this post!
I cannot see how RS is going to beat or meet estimates in the 4th quarter. The workers are not happy and the product is overpriced for today's economy! Plus, they going spend so much in advertising; they may just breakeven. I looking forward to covering at $5 in the next year!
Adam and the CFO are the primary ones responsible for tanking it own stock price. August it was at $31 and CFO said something about have to many marketing compaigns out and forgot to close the ones that were not working - tank it down to $19! Cover again and last CC said it does not see sales improving - especially in the kiosk segament and lowered guidance a penny or two and it fell the next day with duel downgrades - bottom out at $16.25??? I don't like this company at all. They are just to liberal with their info to the investment community and does not see the consequences. The 3 qtr would been mean expectations if the CFO did not open his yap! Top management does not get it! Who would invest in company that loves to tank it own stock like it was somethng fun to do. "They never will defend this stock that for sure!"
Dont foget the CEO got seems a million dollar bonus - and the stock holders all suffered - wish those greedy CEOs could only take bonuses when stock goes up - time for Adams to get booted and get a real CEO in the mix.