What Happened?
Shares of online study and academic help platform Chegg (NYSE: CHGG) fell 13.8% in the morning session after the company announced a massive restructuring plan that included laying off 45% of its workforce and bringing back its former CEO to deal with the negative impact of Artificial Intelligence on its business.
The educational technology firm cut about 388 jobs, citing a significant drop in revenue. The company stated that the "new realities of AI" and less traffic from Google had hurt its core homework help business, as students turned to free AI tools. Along with the job cuts, Chegg announced that its former CEO, Dan Rosensweig, was returning to lead the company. As part of the overhaul, the firm planned to shift its focus toward professional courses and the skills development market to find new growth.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Chegg? Access our full analysis report here.
What Is The Market Telling Us
Chegg’s shares are extremely volatile and have had 100 moves greater than 5% over the last year. But moves this big are rare even for Chegg and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was about 21 hours ago when the stock gained 5.7% on the news that optimism surged over a potential trade truce between the U.S. and China.
Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.
Chegg is down 25.3% since the beginning of the year, and at $1.26 per share, it is trading 52.6% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $16.48.
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