Why Chegg, Inc. Shares Crashed

Is Chegg's drop meaningful? Or just another movement?

Feb 14, 2014 at 5:54PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chegg, (NYSE:CHGG) fell more than 22% Friday after the connected education platform specialist turned in better-than-expected fourth-quarter results, but followed with disappointing forward margin guidance.

So what: Quarterly revenue rose 13% year over year, to $77.1 million, which translated to adjusted net income of $0.40 per diluted share. Analysts, on average, were looking for adjusted earnings of just $0.22 per share on sales of $75.02 million.

Going forward, Chegg expects first quarter and full year 2014 revenue in the ranges of $70 million to $72 million, and $310 million to $320 million, respectively. The midpoint of both ranges stands slightly above analysts' estimates for first quarter and full-year sales of $70 million and $313.3 million, respectively.

However, Chegg also anticipates adjusted gross margin for the current quarter between 7% and 9%, and for the full-year between 25% to 27%. By comparison, adjusted gross margin has remained steady at around 32% for each of the past two years.

Now what: Investors are understandably upset knowing that means Chegg's GAAP net losses are set to increase considerably, and that's after they already widened from a loss of $49 million in 2012 to $55.9 million in 2013. As it stands, and with just $76.9 million in cash remaining on its balance sheet at year end, Chegg needs to prove it can at least keep margins steady as it continues growing revenue. Until then, I'm perfectly happy watching from the sidelines.

Consider the six incredible growth stocks in this free report
In the meantime, there are plenty of other great growth stocks out there. But where should you look?

Consider the investing expertise of Motley Fool co-founder David Gardner, who has proved skeptics wrong, time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently, one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market, and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers