Today, investors in Chegg (NYSE:CHGG) are seeing a lot of red. Currently, shares of CHGG stock have plummeted 45% on a rather disastrous day. To top it off, this move comes on heavy volume, with more than 25 times the average daily volume of shares already having traded hands as of this morning.
This sort of rapid decline is one that’s worth looking at. Indeed, in the case of Chegg, this decline is a continuation of a longer term bearish trend this year. Since hitting its 52-week high of more than $115 per share earlier this year, CHGG stock has sold off to below $35 per share, dropping approximately 70% from its peak.
Given this bearish momentum, investors have reason to take a closer look at this company. Let’s dive into what’s driving declines for this online textbook company right now.
CHGG Stock Plummets As the Company Warns of Underwhelming Earnings Results
Today, Chegg’s CEO Dan Rosensweig noted bearish expectations for upcoming Q4 results. Any sort of warning from a company’s management team that earnings are likely to underwhelm will most likely be a reason to sell for many investors. Indeed, in the case of Chegg, this online textbook company’s valuation is one that investors don’t seem too enamored with right now, given this news.
Currently, CHGG stock trades right around pre-pandemic levels. The 70% market capitalization hit this company has taken since its highs this year also means that investors who have stayed invested in Chegg through the pandemic now essentially have nothing to show for it.
One of the reasons for this: Investors seem to think we’re back to normal. At least, as far as colleges and universities go.
The company is expected to report worse-than-expected numbers. These numbers are reportedly the result of more higher education institutions ditching online learning in favor of in-person instruction. Additionally, Chegg expects to see a slowdown in enrollment in the coming quarters.
While Chegg notes it expects this dip to be temporary, it’s something investors in CHGG stock feared. Indeed, an online textbook stock is likely to see a material boost at a time when most learning is carried out online. However, pulling the plug (perhaps faster than expected) has brought this company’s valuation down in a hurry.
Where will CHGG stock go from here? Time will tell. However, for now, Chegg looks like a stock investors simply don’t want to touch.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.