What Happened?
A number of stocks jumped in the after-market session after markets continued to rally as the latest inflation data reinforced expectations for a Federal Reserve rate cut as soon as September. The latest Consumer Price Index (CPI) report for July showed inflation holding steady, reinforcing market expectations that the Federal Reserve could begin cutting interest rates as soon as September. Lower interest rates generally stimulate the economy by making borrowing cheaper for consumers and businesses. This can lead to increased consumer spending and e-commerce activity, which directly benefits online retail and marketplace companies. The positive economic outlook fueled a broad-based rally, pushing the S&P 500 and Nasdaq to new record highs and lifting most growth-oriented technology stocks.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Consumer Subscription company Udemy (NASDAQ:UDMY) jumped 4.8%. Is now the time to buy Udemy? Access our full analysis report here, it’s free.
- Online Marketplace company Shutterstock (NYSE:SSTK) jumped 6.9%. Is now the time to buy Shutterstock? Access our full analysis report here, it’s free.
- Consumer Subscription company Chegg (NYSE:CHGG) jumped 11.3%. Is now the time to buy Chegg? Access our full analysis report here, it’s free.
- Online Retail company Coupang (NYSE:CPNG) jumped 3.4%. Is now the time to buy Coupang? Access our full analysis report here, it’s free.
- Online Marketplace company eHealth (NASDAQ:EHTH) jumped 4.3%. Is now the time to buy eHealth? Access our full analysis report here, it’s free.
Zooming In On Chegg (CHGG)
Chegg’s shares are extremely volatile and have had 99 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 7 days ago when the stock dropped 13.2% on the news that the company reported dismal second-quarter results that revealed a sharp decline in subscribers and a weak forecast for future revenue. The education technology company reported a steep 40% year-over-year drop in its subscriber numbers, which fell to 2.6 million. This significant decline in users overshadowed the fact that Chegg's revenue and earnings per share actually beat Wall Street's estimates for the quarter. Total revenue decreased by 36% from the previous year, and the company posted a net loss of $35.7 million. Management pointed to lower traffic from Google's AI Overviews as a reason for the slowdown. Looking ahead, the company's third-quarter revenue forecast of $75 million to $77 million also fell short of analyst expectations, signaling continued challenges.
Chegg is down 24.4% since the beginning of the year, and at $1.27 per share, it is trading 52.1% 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 $16.52.
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