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Rosetta Stone, Inc. Message Board

  • Harry_Wild Harry_Wild Nov 7, 2009 2:29 PM Flag

    From Barron's Downgrade from 2 Analyst!

    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?

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