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goldminingXpert (29.48)

Rosetta Stone approaching bottom

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March 01, 2011 – Comments (7) | RELATED TICKERS: RST

While I have been relentlessly negative about Rosetta Stone from its IPO onward, even I am willing to concede we are starting to approach a bottom for RST. I closed my 11th red thumb of RST recently and I am not planning on re-opening to launch #12 yet, as the market has, it seems, fairly taken into account RST management's failure to execute. In yesterday's 4Q earnings press conference, RST management noted the major problems the business has and frankly noted the need to rapidly restructure and reinnovate to save the company's future.

With a loss of 40 cents a share or more coming up in Q1, the era of profitability and positive cash flow is clearly done for RST, but there still is a book value of $9 here, with $5 a share in cash. The brand is also worth something, obviously. While RST shares shouldn't be purchased here (my long-term target for their stock price is their book value), short positions probably should be covered. The stock is off 40% in just a couple of weeks and it appears the market finally has woken up to the issues I raised in my recent articles.

7 Comments – Post Your Own

#1) On March 01, 2011 at 12:08 PM, kdakota630 (29.57) wrote:

Nice call on this for a long time now.

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#2) On March 01, 2011 at 12:27 PM, checklist34 (99.71) wrote:

agree with dakota. 

I have wondered at times if one traded just one stock, but got to know it completely inside and out, if that could be a successful strategy?

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#3) On March 01, 2011 at 4:48 PM, Valyooo (99.43) wrote:

Checklist,

I think about that all the time.  I think it would be best to know one stock inside and out, and I also think there has to be somebody who does nothing but trade the spy all day every day.

GMX, props for the calls.

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#4) On March 01, 2011 at 9:37 PM, JakilaTheHun (99.94) wrote:

Good call, GMX.

I think $9 is about an appropriate valuation for now.  Net Tangible Assets are worth about $6 and it's probably worth a 1.5x multiple to NTA due to the growth potential.

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#5) On March 02, 2011 at 7:49 AM, MajorBob04 (99.46) wrote:

GMX,

Thanks for the updated view of RST.  I sold my shares after losing about 15%.  I speak several languages and I was initially excited about RST, but after doing more research and actually purchasing the software and testing other packages, I found that the future didn't look so bright.

If RST can reduce the price but still make a profit I think they can drive a decent business, especially here in North America.

I also think that they could leverage the wave of social tools to build a sense of community in multiple languages - that might be worth a small subscription.

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#6) On March 02, 2011 at 11:16 AM, TDRH (99.68) wrote:

I used the software, it is good stuff.  That said I like it at $11.00.

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#7) On March 03, 2011 at 4:47 AM, Friendlysurfer (44.74) wrote:

I Agree with MajorBob. They should issue cheaper versions for the retail customer. The only indicator I was watching disappointed me:

International sales: Highlighted as a success by the company, it was actually a desaster: Growth Q4 over 90%.... sounds good, doesn't it?.... no it does not: In Q3 the international growth was 120%.... so: Growth slowed by 30%!!! 

 I told myself to sell if international growth would not at least beat the Q3 growth... consider: they launched a new product in Q4... not being accepted by the customer

 I did not buy their product for my dad, since it is simply put: Bloody expensive 

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