Chegg Stock plunges because its activity slowed during the reopening of schools
Shares of Chegg were trading sharply lower in the morning after the online education company warned that fourth quarter financial results will be well below Street’s previous expectations, as student behavior changes with the reopening of schools. schools after last year’s Covid-related closures.
Shares of Chegg (ticker: CHGG) in Tuesday’s premarket sessions fell 35% to $40.80.
For the third trimester,
posted revenue of $171.9 million, up 12% from a year ago, and slightly below Street’s consensus forecast of $174.5 million. Non-GAAP earnings were 20 cents per share, in line with consensus.
Forecasts were the problem: For the fourth quarter, Chegg forecast revenue of $194 million to $196 million, well below Street’s consensus of $240.6 million.
“At the end of September, it became clear to us that the education sector is experiencing a downturn which we believe is temporary and which is a direct result of the Covid-19 pandemic,” Chegg CEO Dan Rosensweig said in a statement. a statement. “Despite these trends, our team continues to perform at a high level. Chegg is in an excellent position to come out of this stronger than ever and take advantage of the opportunities that come our way.
The company said its board approved a $500 million increase in its securities buyback program, bringing the total to $1 billion.
“A combination of variants, increased job opportunities and compensation, and fatigue all led to significantly fewer enrollments than expected this semester,” Rosensweig said. added in prepared remarks for the company’s post-earnings conference call. “And the students who have enrolled take less and less rigorous courses and receive lower-graded assignments. We believe this is a post-pandemic impact that will affect this school year but is not sustainable for higher education in the long term. Learning sites and apps, both free and paid, in the US and Canada have seen a significant drop in traffic since the start of the fall semester. »
Write to Eric J. Savitz at [email protected]