Chegg drops 37% as CEO says 'people are changing their priorities to make money rather than learning' and inflation puts pressure on direction

Chegg drops 37% as CEO says ‘people are changing their priorities to make money rather than learning’ and inflation puts pressure on direction

A “Help Wanted” sign hangs from the window of Gino’s Pizza on Main Street in Patchogue, New York, on August 24, 2021.Steve Pfost/Newsday RM/Getty Images

  • Chegg plunged 37% on Tuesday as investors digested the company’s first-quarter earnings and revenue forecast.

  • Chegg said he expects second-quarter revenue of up to $192 million, which is lower than analysts’ estimates.

  • The education society said inflation and rising wages are shifting priorities to work rather than learning.

Chegg shares plunged as much as 37% on Tuesday as investors weighed the education company’s first-quarter earnings against its lower 2022 revenue forecast, in part due to a drop in the number of students.

Chegg posted adjusted earnings per share of $0.32 in the first quarter, beating analysts’ expectations of $0.08. The company’s first-quarter revenue of $202 million was about $1 million lower than analysts’ estimates and represents year-over-year growth of just 1.9%.

Additionally, the company said it has 5.4 million subscribers to Chegg services, representing a 12% year-over-year increase.

But Chegg lowered its revenue forecast for fiscal year 2022 to between $740 million and $770 million from its earlier forecast of between $830 million and $850 million. That’s below analyst estimates for $843 million in revenue in 2022. Additionally, Chegg now sees second-quarter revenue of up to $192 million, which is below analysts’ average estimate of $209 million. of dollars.

The disappointing advice is driven by the fact that rising inflation and rising wages are causing people to rethink the value proposition between work and school. A combination of declining enrollment in higher education schools, the economy and inflation has led to “reduced traffic to higher education support services” like Chegg, the company said. .

“With higher salaries and a higher cost of living, more and more people are changing their priorities to earning money rather than learning, resulting in a lower course load or delayed enrollment. in schools right now,” Chegg CEO Dan Rosensweig said.

The company said it has seen at least 1 million American college students drop out or delay higher education in the past two years. Ultimately, the company sees these trends as temporary “and when they fade, our operating model, balance sheet and leading brand put us in a strong position to accelerate our growth,” Rosensweig said.

Chegg stock is down about 85% from its all-time high and down more than 50% since the start of the year.

Read the original article on Business Insider

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