As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the consumer subscription industry, 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 1.3% while next quarter’s revenue guidance was in line.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 12.2% since the latest earnings results.
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 $77.74 million, down 43.1% 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.
“This quarter marks an inflection point for Chegg with our recent decisive action to streamline our structure, strengthen our balance sheet, and focus Chegg on the large and growing skilling market,” said Dan Rosensweig, CEO and Executive Chairman of Chegg.
Chegg delivered the slowest revenue growth of the whole group. The company reported 2.18 million users, down 43% year on year. Interestingly, the stock is up 3.1% since reporting and currently trades at $0.92.
Read our full report on Chegg here, it’s free for active Edge members.
Best Q3: Roku (NASDAQ:ROKU)
With a name meaning six in Japanese because it was the founder's sixth company that he started, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Roku reported revenues of $1.21 billion, up 14% year on year, in line with analysts’ expectations. The business had a strong quarter with EBITDA guidance for next quarter exceeding analysts’ expectations and full-year EBITDA guidance exceeding analysts’ expectations.
The market seems happy with the results as the stock is up 7.8% since reporting. It currently trades at $101.55.
Is now the time to buy Roku? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Bumble (NASDAQ:BMBL)
Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ:BMBL) is a leading dating app built with women at the center.
Bumble reported revenues of $246.2 million, down 10% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a decline in its buyers and a significant miss of analysts’ number of paying users estimates.
As expected, the stock is down 32.5% since the results and currently trades at $3.67.
Read our full analysis of Bumble’s results here.
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 $271.7 million, up 41.1% year on year. This number surpassed analysts’ expectations by 4.3%. Aside from that, it was a satisfactory quarter as it also logged a solid beat of analysts’ EBITDA estimates but EBITDA guidance for next quarter missing analysts’ expectations.
Duolingo achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The company reported 135.3 million users, up 19.6% year on year. The stock is down 20.3% since reporting and currently trades at $208.45.
Read our full, actionable report on Duolingo here, it’s free for active Edge members.
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 $11.51 billion, up 17.2% year on year. This print met analysts’ expectations. Taking a step back, it was a mixed quarter as it also recorded EPS guidance for next quarter exceeding analysts’ expectations but a significant miss of analysts’ EBITDA estimates.
Netflix had the weakest performance against analyst estimates among its peers. The company reported 317.2 million users, up 12.2% year on year. The stock is down 22.2% since reporting and currently trades at $96.64.
Read our full, actionable report on Netflix here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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