What Happened?
Shares of online study and academic help platform Chegg (NYSE:CHGG) jumped 5.3% in the afternoon session after the company reported third-quarter results that showed better-than-expected profitability and a strategic shift toward its growing skilling business, overshadowing a steep drop in overall revenue. Total revenue fell by 42% year-over-year to $78 million, but the company surpassed its adjusted EBITDA guidance by $5 million due to cost-cutting efforts. Chegg announced it was restructuring into two units, with a focus on its "Chegg Skilling" division as the new growth engine. This segment, which includes professional courses, was on track for 14% year-over-year growth with a projected full-year revenue of $70 million. The company also announced the return of Dan Rosensweig as CEO to lead this strategic pivot. Investors appeared to focus on the company's improved operational management and the growth potential in the skilling market rather than the decline in its traditional academic services.
Is now the time to buy Chegg? Access our full analysis report here.
What Is The Market Telling Us
Chegg’s shares are extremely volatile and have had 104 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 12 days ago when the stock gained 5.8% on the news that the stock rebounded as the company announced a major restructuring plan that included a leadership change and a significant reduction in its workforce. As part of the shift, executive chairman Dan Rosensweig returned to the role of president and CEO. Chegg's plan involved cutting its workforce by 45% with the goal of reducing expenses by $100 million by 2026. This move was a response to challenges from reduced Google search traffic and the growing impact of AI on its academic business. The company aimed to reposition itself for growth in the skilling market, valued at over $40 billion. Chegg expected its new professional and enterprise-focused offerings to bring in around $70 million in revenues in 2025.
Chegg is down 28.9% since the beginning of the year, and at $1.20 per share, it is trading 54.9% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $16.89.
Microsoft, Alphabet, Coca-Cola, Monster Beverage—all began as under-the-radar growth stories riding a massive trend. We’ve identified the next one: a profitable AI semiconductor play Wall Street is still overlooking.Go here for access to our full report.