Chegg stocks dive 32% on lower full-year guidance

Shares of Chegg Inc. significantly sank on Monday’s after-hours trading after reporting weak full-year guidance despite exceeding earnings expectations.

The textbook company plunged 31.95% or 7.98 points to $17.00 per share. This performance marks the lowest movement of the stock since the first quarter of 2018.

It also negatively moved from a slight upturn of 0.97% or 0.24 points to $24.98 per share in regular trading. The downdraft dragged a total of $1.01 billion to its market capitalization.

Accordingly, Chegg’s first-quarter figures came in better than expected. The firm reported earnings of $0.32 per share, above the market consensus of $0.24. Consequently, the number increased from the previous record of $0.28 per share in the same period of 2021.

Then, its latest quarterly revenue was $202.00 million, outpacing the average analysts’ estimate of $201.00 million. The key metric also edged up from the $198.40 million a year ago.

However, the problem came in with the lower second-quarter forecast and annual guidance. Correspondingly, the firm reduced its guidance to reflect the current market conditions better.

As a result, company executives expected second-quarter adjusted Ebitda to be between $66.00 million to $68.00 million. Eventually, they anticipated a quarterly net revenue of $188.00 million to $192.00 million.

Meanwhile, experts projected an adjusted Ebitda of $77.40 million on net revenue of $210.6 million.

For the full year, Chegg slashed its revenue forecast to a range of $740.00 million to $770.00 million. This outlook skidded from its previously stated range of $830.00 million to $850.00 million.

Moreover, the estimated annual adjusted Ebitda is between $220.00 million to $235.00 million. Still, the guidance is lower from the prior $260.00 million to $270.00 million.

Low enrollments pull Chegg stocks

Chegg blamed the drop in the muted number of students seeking higher education and the lesser school workload. In addition, it noted that higher wages and increased cost of living caused people to shift their priorities towards earning over learning.

Consequently, the online-education company explained that this issue resulted in a lower course load or delayed school enrollment.

In the United States, Chegg estimated that 1.00 million students postponed higher education over the last two years. Thus, the impact of these factors is evident in the reduced traffic to higher education support services.

The company had previously rebounded since delivering its original forecast in February. However, the current downdraft caused the stock to trade 69.91% or 58.03 points lower in the past year. It underperformed the S&P 500 index, which has fallen 1.20%.