Looking back on consumer subscription stocks’ Q1 earnings, we examine this quarter’s best and worst performers, including Chegg (NYSE: CHGG) and its peers.
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
The 8 consumer subscription stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was in line.
Luckily, consumer subscription stocks have performed well with share prices up 20.5% on average since the latest earnings results.
Chegg (NYSE: CHGG)
Started as a physical textbook rental service, Chegg (NYSE: CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Chegg reported revenues of $121.4 million, down 30.4% year on year. This print exceeded analysts’ expectations by 5.8%. Despite the top-line beat, it was still a mixed quarter for the company with an impressive beat of analysts’ EBITDA estimates but a decline in its users.
“In Q1, we exceeded our revenue and adjusted EBITDA expectations, delivered $16 million of free cash flow and continued to diversify our revenue streams. We are encouraged by the conversations in our strategic alternatives process and the value these organizations see in our business,” said Nathan Schultz, Chief Executive Officer & President of Chegg,
Chegg pulled off the biggest analyst estimates beat but had the slowest revenue growth of the whole group. The company reported 3.19 million users, down 31.5% year on year. Unsurprisingly, the stock is up 32.8% since reporting and currently trades at $0.90.
Read our full report on Chegg here, it’s free.
Best Q1: Duolingo (NASDAQ: DUOL)
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Duolingo reported revenues of $230.7 million, up 37.7% year on year, outperforming analysts’ expectations by 3.4%. The business had a very strong quarter with an impressive beat of analysts’ EBITDA estimates.
Duolingo delivered the fastest revenue growth and highest full-year guidance raise among its peers. The company reported 130.2 million users, up 33.4% year on year. The market seems happy with the results as the stock is up 32.4% since reporting. It currently trades at $529.50.
Is now the time to buy Duolingo? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Roku (NASDAQ: ROKU)
Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Roku reported revenues of $1.02 billion, up 15.8% year on year, exceeding analysts’ expectations by 1.5%. Still, it was a slower quarter as it posted a slight miss of analysts’ number of total hours streamed estimates and a significant miss of analysts’ EBITDA estimates.
Interestingly, the stock is up 12.9% since the results and currently trades at $76.
Read our full analysis of Roku’s results here.
Match Group (NASDAQ: MTCH)
Originally started as a dial-up service before widespread internet adoption, Match (NASDAQ: MTCH) was an early innovator in online dating and today has a portfolio of apps including Tinder, Hinge, Archer, and OkCupid.
Match Group reported revenues of $831.2 million, down 3.3% year on year. This print was in line with analysts’ expectations. However, it was a slower quarter as it produced a decline in its users and a slight miss of analysts’ number of payers estimates.
The company reported 14.2 million users, down 4.9% year on year. The stock is up 2.1% since reporting and currently trades at $31.
Read our full, actionable report on Match Group here, it’s free.
Netflix (NASDAQ: NFLX)
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Netflix reported revenues of $10.54 billion, up 12.5% year on year. This result met analysts’ expectations. Overall, it was a strong quarter as it also logged EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.
The company reported 305.5 million users, up 13.3% year on year. The stock is up 23.8% since reporting and currently trades at $1,208.
Read our full, actionable report on Netflix here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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