Chegg ( NYSE: CHGG ) stock marked a double-digit percentage decline on Tuesday after a big miss on earnings reported on Monday evening. After the miss, analysts also called into question the prospects for a turnaround.
“We are downgrading Chegg to Sector Weight as our prior upgrade thesis around EBITDA margin upside does not look like it will play out, at least over the near term,” Keybanc Capital Markets analyst Jason Celino told clients on Tuesday.
He added that guidance for 2023 revenue and EBITDA “came in much worse than feared” which eroded his team’s previously bullish thesis. He advised the stock should remain in the range-bound for quite some time as management seeks to regain investor confidence.
“With heightened execution risk, we believe shares may remain in the penalty box for an extended period of time, hence our downgrade,” Celino concluded.
Similarly, Morgan Stanley analyst Josh Baer, who assessed the stark reaction to the earnings results as “fair.” As such, he retained a Hold-equivalent rating and trimmed his price target from $31 to $18.
“Our $18 price target implies an EV/CY24 EBITDA multiple of ~9x, a slight discount to the EdTech Software median at ~10x, but warranted given Chegg's lower-growth profile, significant step back in execution, and increased competitive risk,” Baer advised.
Shares of Chegg ( CHGG ) fell 18.16% in midday trading on Tuesday.
Read the earnings call transcript .
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Chegg stock sinks nearly 20% as earnings miss shakes analyst confidence