Chegg stock jumps on restructuring plans, job cuts

Shares of Chegg (CHGG) are trading higher Tuesday after the company unveiled a workforce reduction as part of a broader restructuring initiative. The educational technology firm has announced that it will reduce its global headcount by 23%.

Yahoo Finance's Josh Schafer breaks down the details.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith.

Video transcript

Take a look at some trending figures that were watching this morning.

Shares of check surging after the company announced plans to slash 23% of its global workforce in a bigger we structure move for the firm those shares of 15% up over 19%.

Earlier in the day, Y finances Josh for joining us now with more Josh, this is a huge boon for this company.

I mean, they say that they are looking for expense savings of up to 50 million in the next year.

Plus what else?

Tell us about it, man.

I don't want to slow your role too much, but we got to look at a Max charter check.

I mean, this is why we're doing a restructuring effort, right?

This stock was over $100 at one point during the pandemic boom.

So yes, a restructuring effort.

And I think largely for investors something that they've been waiting for right?

We knew as the new CEO Nathan Schultz came in, they want some sort of change here, and this is the change that you're getting.

I think the large question that Wall Street analysts are asking this morning is what do you do with that cost savings, right?

Is it going to be reinvested back into the company to help with the A. I efforts that check has been building out?

Or is it simply going to be a way to kind of protect margin and help earnings moving forward here?

Because we know the revenue growth has simply been slowing since the launch of CG BT.

I'm looking at research from Brent Bill over at Jeffries, friend of the programme.

He's pointing out that revenue fell 7% in 2023.

It's projected to fall 9% year over in 2024.

Also looking.

Their estimates show potentially decline year over year in 2025.

Just simply that the growth engines of this company have not fully been clicking since the launch of CCPT and other A. I solutions that students are going to to find freeways rather than paying CAG to use their A i solutions.

So I think overall, the looming question here is simply is this going to work?

And then also, when does it work, right?

At what point does this help bring you back to revenue growth?

If you do reinvest this money.

Is this gonna be a 2020 late 2024 story, more of a 25 story kind of How long can you go at this pace seems to be the looming question and what's also interesting about Che.

And when you take a look at that longer term chart and you talk about what you have covered in the past, their investments in a I and this is one of the companies where it has pretty much failed to excite.

Investors surrounding this and on the flip side could actually be pressured because of advancements in a I.

So I also think they have a tough line to walk there, just really showcasing as to why some of their investments in a I are going to pay off and why it's going to position the company in a better light than they are right now.

I mean, zooming out the conversation a little bit when we talk about a I.

It's always important to talk about who the actual consumer is of the A. I right, you talk about NVIDIA, their consumer is large tech hyper scalers, and those companies are going to pay up right you talk about the large tech hyper scalers and you think about Microsoft and Google?

Well, who pays them?

Businesses?

Pay them right.

Businesses pay them to use that A. I who pays C, maybe schools, but potentially students, right?

And if you're a college student that used to sit around and use keg with your fellow students to study and you can find a free solution online, I think it's a tough consumer, especially with you guys have been talking this morning about a tough consumer environment.

Overall, I think it's hard when there's free a I solutions all over the Internet.

It's hard to get people to come back unless your A I solution is that much better, which is what they're pitching, and maybe they'll eventually get there.

But right now, I think it's just a tough match.

It's always hard to compete against anything that's free, but I really think if you're in college and you're gearing towards students, that makes it even more difficult trying to get them to pay up for some sort of GP.

T is writing essays.

Guys, it's happening.

It's out there.

All right, Josh, Great up.

Thanks