Chegg Stock Plunges 37% on Tuesday As People Choose Work over Education During Inflation

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Chegg.com
Chegg.com

Chegg stock declined as much as 37% on Tuesday as investors weighed the education company’s first-quarter earnings beat against its lower 2022 revenue guidance, driven mainly by a drop in college students.

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Chegg saw earnings per share of $0.32 in the first quarter, beating analyst expectations by $0.08. Their first-quarter revenue of $202 million was below analyst estimates by roughly $1 million and represented year-over-year growth of just 1.9%.

Additionally, the firm said it has 5.4 million Chegg Services subscribers, which represents a year-over-year increase of 12%.

However, Chegg lowered its fiscal-year 2022 revenue guidance to between $740 million and $770 million from its prior guidance of between $830 million to $850 million. The milestone is below analyst estimates for $843 million in 2022 revenue. Furthermore, Chegg now sees second-quarter revenue of up to $192 million, which is short of the average analyst’s estimate of $209 million. 

Due to rising inflation and higher wages, people shifted their focus to work instead of school. A combination of lower enrollment at higher education schools, the economy, and inflation have led to “reduced traffic to higher education support services” like Chegg, the company said.