Rosetta Stone (RST) PT Raised to $27 at Barrington Research

Barrington Research analyst Alexander Paris, Jr. raised the price target on Rosetta Stone (NYSE: RST) to $27.00 (from $24.00) while maintaining a Outperform rating.

Analyst says: "We would continue to be buyers of RST given the intrinsic value of its parts; continued strong growth at Lexia, which has been driven by a bookings CAGR of 26% since 2014; a more predictable/sustainable sales model as a result of the subscription transition, which will continue to benefit from sales team alignment as the company executes on its top-down and bottom-up go-to-market strategy; improving cash flow; and its already healthy balance sheet with no long-term debt."

As a reminder, RST reported fourth quarter and full year 2018 results yesterday after market close. Highlights of the earnings release:

• Revenue at Lexia Learning ("Lexia"), the Company's Literacy segment, increased 20% year-over-year to a record high $14.5 million.

• Revenue within the Consumer Language segment declined 13% year-over-year to $15.5 million. The expected revenue decline reflects the transition to a full subscription model in which revenue is recognized ratably over the subscription period, which was completed in the first quarter 2018. Consumer Lifetime Value (“LTV”) added was $58.9 million in the full year 2018, an increase of 6% from the year-ago period.

• Revenue within the Enterprise & Education (“E&E”) Language segment decreased 3% year-over-year to $14.6 million, the lowest year-over-year decline in 6 quarters.

• Total operating expenses increased 1% year-over-year, to $39.2 million.

• At December 31, 2018 the Company had zero debt outstanding and cash and cash equivalents totaled $38.1 million.

Shares of RST trade up +28.1%, while SPY trades down -0.84% in morning trading.

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