Online education specialist Chegg Inc. highlighted a sudden slowdown in the education industry Monday afternoon, sending its own shares plunging more than 20% and damaging other online-education stocks.
“In late September, it became clear to us that the education industry is experiencing a slowdown that we believe is temporary and is a direct result of the COVID-19 pandemic,” Chegg
CHGG,
Chief Executive Dan Rosensweig said in a statement Monday that included quarterly earnings information.
The earnings report showed that Chegg’s third-quarter revenue came in slightly lighter than expectations at $171.9 million. The bigger miss came in Chegg’s sales forecast, which called for holiday-season — or finals/midterms-season, in Chegg’s case — sales of $194 million to $196 million. Analysts on average expected third-quarter sales of $173.9 million and fourth-quarter revenue of $241.7 million, according to FactSet.
Online education and other support has experienced a huge uptick in the COVID-19 pandemic, as schools closed and students who felt left behind sought additional resources. Education companies have responded by rushing to Wall Street, which welcomed Udemy Inc.’s initial public offering last week and Coursera Inc.’s IPO earlier in the year.
Coursera IPO: 5 things to know about the online-education company
A slide included with an investor presentation that Chegg prepared for Monday’s report was more specific about where the education industry has begun to struggle recently.
“Some effects of the COVID-19 pandemic have begun to negatively impact enrollments, student course-loads and quantity of graded assignments,” a PowerPoint presentation reads. “Learning sites and apps, both free and paid, in the U.S. and Canada have experienced significantly reduced traffic since the fall semester began.”
Chegg shares had already taken a hit, falling 29.2% in the past three months after an astounding run-up during the COVID-19 pandemic that took shares from less than $30 to more than $250 at their peak earlier this year. Chegg shares closed with a 5.6% gain ahead in Monday’s regular session at $62.76, then dove to less than $48 in after-hours trading; shares have not traded for less than $50 in any regular session since May 2020.
Other education stocks also declined in late trading Monday, as 2U Inc.
TWOU,
and Coursera
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fell more than 1% and freshly public Udemy
UDMY,
declined about 0.6%.
This post was originally published on Market Watch
