Rosetta Stone shrs sink on consumer worries

Nov 6 (Reuters) - Shares of Rosetta Stone Inc (RST.N) fell 14 percent to a new 52-week low on Friday, a day after the company said the current economic environment was affecting its U.S. consumer business, resulting in greater variability in operating results.

On Thursday, the company posted strong third-quarter profit and raised its 2009 outlook.

"We believe investors view Rosetta's product as a higher-priced discretionary item, which is a bit tough to own when the consumer outlook for 2010 is still a bit uncertain," said Brandon Dobell, analyst at William Blair.

Dobell has an "outperform" rating on Rosetta's stock.

Piper Jaffray analyst Mark Marostica, who downgraded the company's stock to "neutral" from "overweight," said he lacked visibility as to when consumers will be more receptive buyers of Rosetta's language learning products.

"We expect the short form advertising market will likely continue to be tight in the near to intermediate term and will place upward pressure on the company's sales and marketing expenses," Marostica added.

The company said market for short form television advertising, its highest-returning media, has tightened and will continue to be soft in the current quarter.

Baird, however, said that the growth in the institutional and international segments can offset short-term weakness in the U.S. consumer market.