NEW YORK (
filled a key slot on its executive team on Wednesday, naming the very experienced Stephen Swad to the CFO post, but investors were unimpressed and the stock slumped on heavier than normal volume.
Swad succeeds Brian Helman, who left the chief financial officer post at the end of August. He will join Rosetta Stone on Nov. 9 from
Comverse Technology Inc.
. Swad's prior experience also includes CFO stints at
Barrington Research quickly weighed in on the pick, calling Swad "an excellent choice" but adding that getting the position filled only makes the firm "incrementally more positive" on the stock because it still looks rich at current levels.
In our opinion, the current valuation is a bit pricey when we consider the uncertainty surrounding the V4 launch and what sort of consumer sales activity we are going to see during the holiday selling season," Barrington told clients in a midday note. The firm maintained a market perform rating on Rosetta Stone with no price target.
The stock fell 4.7% to close at $21.34. Volume of around 313,000 easily surpassed the issue's trailing three-month daily average of roughly 190,000. Year-to-date, however, the shares are still up more than 20%, but all of that appreciation has come since Aug. 31, when the stock scraped near-term intraday low $16.75. Based on Tuesday's close at $22.39, the shares had bounced more than 30% since the start of September, and were sitting comfortably above their 50-day moving average of $19.58.
came under heavy selling pressure
in mid-August after it announced a surprise loss for the third quarter ahead of its first big product launch as a public company -- the release of its Version 4 TOTALe product on Sept. 14. Management uncertainty was also an issue for the Arlington, Va.-based language learning software provider, as in addition to then-CFO Helman's plans to leave, Chief Operating Officer Eric Eichmann resigned abruptly.
With the product launch just under a month old and the company slated to report its third-quarter results on Nov. 1, investors may be getting restless for some indication of how Version 4, which promises more complete immersion and features expanded online tools, is being received in the marketplace.
The current average estimate of analysts polled by
is for Rosetta Stone to report a loss of 7 cents a share in the September period on revenue of $62.7 million.
Wall Street is in wait-and-see mode with Rosetta Stone with six of the nine analysts covering the company rating it at the equivalent of a hold. As recently as three months ago, five of the nine analysts were at strong buy. The current median 12-month price target on the stock is $22, which coincidentally the shares closed above on Tuesday for the first time since late July.
In its Form 8-K related to the hiring of Swad, Rosetta Stone said his base compensation would be around $400,000, and that he would have a bonus target of 60% of his base compensation, or roughly $240,000, among other incentives.
Written by Michael Baron in New York.
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