Investing.com - Rosetta Stone rallied on Thursday as the language learning software company reported a narrower-than-expected loss and confirmed it had completed its transformation to a subscription-based model, prompting bullish calls from Wall Street.
Rosetta Stone (NYSE:RST) surged 30% after reporting a fourth-quarter a loss of 19 cents a share, above expectations compiled by Investing.com for loss of 38 cents a share. Revenue of $44.57 million fell just short of estimates for $44.8 million.
The company blamed the miss on the top line on a decline in its consumer language segment - driven largely from the company's transition from perpetual product sales to subscription-based sales - offsetting record growth in its literacy segment.
Consumer language segment revenue declined 13% year over year to $15.5 million. Revenue at Lexia increased 20% year over year to a record $14.5 million.
"(Last year) was a transformative year for Rosetta Stone, marked by exceptional growth in our Literacy business, re-imaged products in our Language business and the completion of the transition of our company to subscription sales," said Chairman and CEO John Hass.
The company transitioned from a one-time sales model to a subscription-based product, which offers a predictable revenue stream, reducing the rate of customer churn.
The mixed results failed to deter Wall Street, as Barrington reiterated its outperform rating on Rosetta stone and raised its price target on the stock to $27 from $24 on expectations that "(s)ales and revenue growth will return in 2019 after three consecutive down years."
Rosetta Stone expects revenue of about $191 million for 2019 and a full-year loss of $0.68 per share, above its prior forecast for loss of $1.02 a share.