Chegg shares were trading sharply lower the morning after the online education company warned that fourth-quarter financial results will be well short of previous Street expectations, as student behavior shifts with school reopening following last year’s Covid-related shutdowns.
Chegg (ticker: CHGG) shares in Tuesday’s premarket sessions swooned 35% to $40.80.
For the third quarter, Chegg posted revenue of $171.9 million, up 12% from a year ago, and a little below the Street consensus forecast of $174.5 million. Non-GAAP profits were 20 cents a share, right in line with consensus.
The guidance was the issue: for the fourth quarter, Chegg projects revenue of $194 million to $196 million, well below the Street consensus at $240.6 million.
“In late September it became clear to us that the education industry is experiencing a slowdown that we believe is temporary and is a direct result of the Covid-19 pandemic,” Chegg CEO Dan Rosensweig said in a statement. “Despite these trends, our team continues to execute at a high level. Chegg is in an excellent position to come out of this stronger than ever and take advantage of the opportunities before us.”
The company said its board has approved a $500 million increase in its securities repurchase program, increasing the total to $1 billion.
“A combination of variants, increased employment opportunities and compensation, along with fatigue, have all led to significantly fewer enrollments than expected this semester,” Rosensweig added in remarks prepared for the company’s post-earnings conference call. “And those students who have enrolled are taking fewer and less rigorous classes and are receiving less graded assignments. We believe this is a post pandemic impact that will affect this school year but is not sustainable for higher education long term. Learning sites and apps, both free and paid, in the U.S. and Canada have experienced significantly reduced traffic since the fall semester began.”
Write to Eric J. Savitz at [email protected]
