Why Is Chegg (CHGG) Stock Plunging 20% Today?


  • Chegg (CHGG) stock is falling on Tuesday alongside its latest earnings release.
  • That’s despite its EPS and revenue beating estimates.
  • Even so, free AI software is eating into its revenue and earnings.
CHGG Stock - Why Is Chegg (CHGG) Stock Plunging 20% Today?

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Chegg (NYSE:CHGG) stock is falling on Tuesday following the release of the online education company’s earnings report for the first quarter of 2024.

That’s despite it reporting adjusted EPS of 26 cents alongside revenue of $174.35 million. Both of these are better than Wall Street’s estimates of 25 cents per share and $174.1 million in revenue.

Unfortunately, however, both Chegg’s adjusted EPS and revenue came in down year-over-year. The company’s EPS for Q1 2023 was 27 cents while its revenue was $187.6 million.

The rise of free artificial intelligence software is eating into Chegg’s business. Jefferies analyst Brent Thill provided the following warning for CHGG stock alongside a downgrade and price target cut:

“We question if Chegg can build an AI experience that is meaningfully better than free alternatives that students will be willing to pay for […] Chegg has historically always beaten free competitors in the marketplace, but we believe the AI wave presents a truly credible free product experience to Chegg’s paid subscription.”

CHGG Stock Falls on Leadership Change

To go along with all of this, Chegg has announced that Nathan Schultz is taking over as its President and CEO. This has him replacing Dan Rosensweig. Rosensweig is taking on the Executive Chairman role following 14 years as the CEO of the company.

All of this news has CHGG stock down 19.7% as of Tuesday morning. That comes with some 5.4 million shares traded. Its daily average trading volume is closer to 2.7 million shares.

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On the date of publication, William White did not hold (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.

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