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Tue, June 6 at 7:00PM ET

Chegg (CHGG) Stock Sinks 20% on Weak Guidance, Analyst Downgrade

  • Chegg (CHGG) reported earnings today and beat estimates.
  • However, Keybanc downgraded the stock, citing its weak forward guidance.
  • CHGG stock dropped immediately as traders considered the data, guidance and downgrade.
CHGG stock - Chegg (CHGG) Stock Sinks 20% on Weak Guidance, Analyst Downgrade

Source: Casimiro PT /

Stocks are supposed to go up after an earnings beat, right? Not always, as Chegg (NYSE:CHGG) stock is tanking today. The company’s fourth-quarter 2022 financial results exceeded Wall Street’s consensus forecasts. However, Chegg’s forward guidance disappointed some investors and an analyst, who issued a downgrade on Chegg’s shares.

If you know a high school or college student, then you may be familiar with Chegg. The company provides a “student-first connected learning platform,” including online test preparation resources.

Chegg President and CEO Dan Rosensweig acknowledged “the last several years have been very challenging for everyone,” as if to prepare investors for dismal quarterly results. The data actually wasn’t bad, however.

For Q4 2022, Chegg reported revenue of $205.2 million, down 1% year over year but still beating the analyst consensus estimate of $202.1 million. Also, Chegg posted adjusted earnings per share (EPS) of 40 cents, while Wall Street only expected 38 cents.

What’s Happening with CHGG Stock?

So far, there doesn’t seem to be anything Chegg’s investors could object to. Yet, CHGG stock dropped 20% early this morning.

What happened? Remember, the market’s response isn’t always about actual results; sometimes, a company’s forward guidance is more important.

In this case, analysts predicted Chegg would guide for full-year 2023 revenue of $782 million. However, Chegg instead posted 2023 revenue guidance of $745 million to $760 million. So, that’s what’s bothering the investing community.

Today’s traders are unhappy with this, and evidently so is KeyBanc analyst Jason Celino. Citing the company’s unambitious revenue guidance, Celino and other KeyBanc analysts downgraded CHGG stock from “overweight” (which is similar to “buy”) to “sector weight” (which is similar to “hold.”)

The KeyBanc analysts might be willing to reconsider their position on Chegg if the company improves its margins and addresses other concerns. For the time being, though, Chegg is out of favor with KeyBanc analysts and today’s financial traders.

On the date of publication, David Moadel 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 Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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