Wrapping up Q3 earnings, we look at the numbers and key takeaways for the consumer subscription stocks, 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 mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.4% while next quarter’s revenue guidance was 2.2% below.
Thankfully, share prices of the companies have been resilient as they are up 6.8% on average since the latest earnings results.
Weakest Q3: 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 $136.6 million, down 13.5% year on year. This print exceeded analysts’ expectations by 1.9%. Despite the top-line beat, it was still a slower quarter for the company with a decline in its users and a significant miss of analysts’ number of services subscribers estimates.
“While the global education industry continues to experience tremendous change, in Q3, we showed early progress against our strategic plan and delivered better-than-expected revenue and adjusted EBITDA. However, recent technology shifts and generative AI have created significant headwinds, and as a result, we are undertaking an additional restructuring,” said Nathan Schultz, Chief Executive Officer & President of Chegg, Inc.
Chegg delivered the slowest revenue growth of the whole group. The company reported 3.83 million users, down 12.9% year on year. Interestingly, the stock is up 29.8% since reporting and currently trades at $2.31.
Read our full report on Chegg here, it’s free.
Best Q3: 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 $192.6 million, up 39.9% year on year, outperforming analysts’ expectations by 1.8%. The business had a very strong quarter with a solid beat of analysts’ EBITDA estimates and full-year EBITDA guidance exceeding analysts’ expectations.
Duolingo achieved the fastest revenue growth and highest full-year guidance raise among its peers. The company reported 113.1 million users, up 36.1% year on year. The market seems happy with the results as the stock is up 9.1% since reporting. It currently trades at $348.
Is now the time to buy Duolingo? Access our full analysis of the earnings results here, it’s free.
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 $895.5 million, up 1.6% year on year, falling short of analysts’ expectations by 0.6%. It was a slower quarter as it posted revenue guidance for next quarter missing analysts’ expectations significantly and a decline in its users.
Match Group delivered the weakest performance against analyst estimates in the group. The company reported 15.21 million users, down 3.2% year on year. As expected, the stock is down 13.9% since the results and currently trades at $32.56.
Read our full analysis of Match Group’s results here.
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 $9.82 billion, up 15% year on year. This print surpassed analysts’ expectations by 0.6%. Overall, it was a very 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 282.7 million users, up 14.4% year on year. The stock is up 27.6% since reporting and currently trades at $877.50.
Read our full, actionable report on Netflix here, it’s free.
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 $1.06 billion, up 16.5% year on year. This number topped analysts’ expectations by 4.5%. Aside from that, it was a satisfactory quarter as it also logged an impressive beat of analysts’ EBITDA estimates.
Roku delivered the biggest analyst estimates beat among its peers. The company reported 85.5 million monthly active users, up 12.8% year on year. The stock is down 12.4% since reporting and currently trades at $67.97.
Read our full, actionable report on Roku 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 US 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. Said differently, there's still much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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