Chegg, Inc. (CHGG) Stock Plunging in Aftermarket, Here’s the Reason

Chegg, Inc. (CHGG), a direct-to-student learning platform, has declined 29.09% in aftermarket trading session and consequently, is trading at $44.50 at the time of the writing. The stock has plunged after the company announced that the results for the fourth quarter of 2021 would be well short of expectations with the gradual reopening of schools having an impact on online educational companies. On Monday, CHGG closed the day at $62.76 after increasing 5.59% during regular trading hours.

Why CHGG plummeted?

On Monday, CEO of Chegg, online education Specialist Company, Dan Rosensweig said that in late September, it became clear to CHGG that the educational industry was facing a slowdown that was temporary and resulted due to pandemic. A combination of numerous factors, like multiple variants, more opportunities for employment, etc. have led to fewer enrolments, and those enrolled are taking fewer classes, he added. Mr. Rosensweig further said that this post-pandemic impact would have consequences for this school year but is not sustainable for higher education in long term.

Q3 2021 financial highlights

On the same day, i.e. Monday, CHGG reported the financial results for the third quarter of the fiscal year 2021. The quarter ended on 30th September 2021. The company had cash and cash equivalents of $713.83 million on 30th September. The company generated net revenue of $171.94 million during the quarter against $154.01 million for the same period of 2020. The total operating expenses for the period were $104.47 million against $109.45 million for the same period of 2020. The net income generated by the company during the period was $6.65 million (or $0.05 per basic and diluted share) against a net loss of $37.14 million (or $0.29 per basic and diluted share) for the same period of 2020.

Executive commentary

Dan Rosensweig, while commenting on the results said that during the last year and a half, CHGG experienced extraordinary growth. However, in recent days, the company’s business is facing a slowdown. Despite that, he assured, the company is in an excellent position to come out of it stronger than before.

Announcement of the new advisory board

On 28th October, CHGG announced a new academic advisory board. The board would serve to strengthen its commitment to student success and academic integrity. The board is made up of senior academic officials and would provide feedback on the company’s strategies to help it in future.

What’s ahead for CHGG?

During the last three months, CHGG has declined more than 25% on the back of business slowdown concerns. However, the company hopes that the adoption of new business strategies by the company would cause it to expand itself in the future.