By Christiana Sciaudone
Investing.com-- Chegg (NYSE:CHGG) reported stellar results this week, but the numbers either weren't good enough or investors were ready to take profits.
Shares of the online education company have fallen about 14% since it reported earnings on Monday, which included revenue that grew 64% year-over-year and profit of 17 cents a share, beating the 10-cent estimate. It guided revenue of about $775 million for 2021, up from an expected $626 million to $628 million for 2020.
"It's a little bit of a head-scratcher, for us," said Chief Financial Officer Andy Brown. "We had strong third quarter earnings and a nice guide up for the fourth quarter, and we guided for 2021 which nobody I'm aware of has done. Our biggest shareholders are also scratching their heads."
Chegg, a beneficiary of the pandemic that sent college students home in March, rose about 218% to hit a record in August. The stock is currently trading at a forward price to earnings ratio of 58 times, according to Yahoo Finance. That compares to Apple (NASDAQ:AAPL)'s 35 times. Brown doesn't begrudge profit-takers, and says because of the nature of the company, it's value is no surprise.
"We've defined a category, we're clearly the leader in the category," Brown said in a video interview. When that happens, "you typically get a premium valuation."
The company's not resting on its laurels, though, and Brown sees the moment as just the beginning, in the U.S. and abroad.
While the U.S. continues to be a healthy growth area, the pandemic showed that there is heavy demand from non-English speaking countries, which hadn't been on their radar before, Brown said.
"We're starting to see subscriptions coming from countries we never imagined 12 months ago," Brown said. Among the 190 countries identified are Turkey, South Korea and Saudi Arabia. "That to us is super exciting and we've essentially leaned into that growth."
Chegg is making incremental investments in technology, content and marketing to support that growth and is targeting 15 to 20 countries that could become highly relevant.
The company also accelerated investing into preventing password sharing and appears to have eliminated some 85% of the problem that had begun to plague the system.
And growth won't just come organically. Skills-based learning is a newer area for the company and expected to expand.
"Are we acquisitive? The answer is yes," Brown said. Chegg has acquired about a company a year, and may seek out smaller competitors to snap up. "Could I imagine us acquiring more in the skills space? The answer is yes."