'One Step Forward and Two Steps Back': Chegg (CHGG) Stock Crashes 35% After Cutting Outlook, Analyst Downgrades to Neutral
Shares of Chegg (NYSE: CHGG) are down more than 35% in premarket trading Tuesday after the company reduces its full-year revenue and adjusted EBITDA outlook.
Chegg reported first-quarter adjusted EPS of 32c, up from 28c in the year-ago period and beating the consensus estimates of 24c per share. Net revenue came in at $202.2 million, up 1.9% YoY, and missing the consensus estimates of $203.1 million.
For Q2, the education technology company expects net revenue in the range of $188 million to $192 million, well below the analyst consensus of $209.8 million. The company expects adjusted EBITDA in the range of $66 million to $68 million, missing the analyst consensus of $77.1 million.
Chegg expects FY revenue in the range of $740 million to $770 million, down from the previous forecast of $830 million to $850 million, and missing the consensus estimates of $843.1 million. FY adjusted EBITDA is now expected to range between $220 million and $235 million, compared to the previous outlook of $260 million to $270 million and analyst expectations of $266.7 million.
“We had a solid first quarter, and Chegg is executing well against our strategic objectives, despite continued industry headwinds,” said Dan Rosensweig, CEO & President of Chegg.
Piper Sandler analyst Arvind Ramnani cut the rating on CHGG stock to Neutral from Overweight with a price target of $21.00 (from $44.00) after “disappointing” results.
“In our view, we expect Chegg to remain in the penalty box in the near/medium term as this is the second time that CHGG has lowered guidance in six-months. Investors will need to see a steady trend of beat/raises and enrollment stability to gain confidence in the stock. We expect UDMY (earnings on 5/4) and TWOU (5/10) could see similar headwinds," Ramnani said in a client note.
Citi analyst Nithin Pejaver said that Chegg continues to make one step forward and two steps back.
“With two negative surprises in the past three quarters, we believe a turnaround in sentiment for the better will require Chegg to demonstrate multiple quarters of recovery in subscriber trends.
By Senad Karaahmetovic