5 Analysts Takeaways As Chegg's Stock Crashes After Q1 Earnings Report

Zinger Key Points
  • Net revenues missed Street expectations and the company slashed its full-year revenue and adjusted EBITDA guidance.
  • An analyst expected Chegg to “remain in the penalty box” in the near to medium term, with management lowering guidance for the second time in six months.

Chegg Inc CHGG reported its first-quarter adjusted earnings of 32 cents per share, ahead of the consensus estimates of 24 cents per share. Net revenues missed Street expectations and the company slashed its full-year revenue and adjusted EBITDA guidance.

Piper Sandler On Chegg: Analyst Arvind Ramnani downgraded the rating from Overweight to Neutral, while reducing the price target from $44 to $21.

“This earnings call felt like déjà vu—similar to 3Q21, where the company attributed lower visibility to pressured enrollment and traffic metrics,” Ramnani said in the downgrade note.

Ramnani expected Chegg to “remain in the penalty box” in the near to medium term, with management lowering guidance for the second time in six months.

KeyBanc Capital Markets On Chegg: Analyst Jason Celino reiterated a Sector Weight rating.

“While International localization efforts seem to be progressing well, with several earlier than expected country launch announcements, the step back in growth recovery trends is disappointing,” Celino said in a note to clients.

He reduced the EBITDA estimates for fiscal 2022 and 2023 from $264.4 million to $227.7 million and from $316.5 million to $251.6 million, respectively.

Needham On Chegg: Analyst Ryan MacDonald maintained a Hold rating on Chegg.

“We expect international subscriber growth and domestic ARPU expansion to continue to serve as an offset, and if subscriber growth comes in ahead of expectations, strong ARPU could couple to buck guidance and drive topline growth in FY22,” MacDonald said. He added that the lack of near-term visibility into enrollments and student usage trends keeps him on the sidelines.

Raymond James On Chegg: While reiterating a Market Perform rating for the company, analyst Brian Peterson said the reduction in guidance follows encouraging trends in the fourth quarter of 2021, with course intensity and enrollment trends “providing more headwinds than originally anticipated.”

Although there are “opportunities and compelling attributes for Chegg, including plenty of headroom in international markets and new content categories (as well as a healthy margin profile),” the lack of visibility into the company’s core business “makes it difficult to recommend shares,” he added.

Morgan Stanley On Chegg: Analyst Josh Baer maintained an Equal-Weight rating while reducing the price target from $37 to $20.

“If last Q's better than feared results & commentary represented one step forward, Q1 results were two steps backward,” Baer said in the note.

“Services guide now implies only ~1% (MSe) FY22 YoY organic growth. Mgt cited various industry impacts lowering top of funnel traffic, weighing on subscriber outlook,” he added.

CHGG Price Action: Shares of Chegg had tanked 29.31% to $17.61 at the time of publication Tuesday.

Posted In: Arvind RamnaniBrian PetersonJason CelinoJosh BaerKeyBanc Capital MarketsMorgan StanleyNeedhamPiper SandlerRaymond JamesRyan MacDonaldAnalyst ColorEarningsNewsEducationDowngradesPrice TargetReiterationAnalyst RatingsGeneral