cheesy (NYSE: NRDY) and Chegg (NYSE: CHGG), who both provide online education services, have both been crushed in the past year as investors turned away from the industry in a post-lockdown market.

Nerdy went public by merging with a Special Purpose Acquisition Company (SPAC) last September. Its stock closed at $ 11.56 on day one, but is now trading at around $ 4 per share. Chegg, which went public via an IPO in 2013, has lost almost 70% of its value in the past 12 months. Let’s see if either of the struggling education stocks can possibly rebound in 2022.

What are Nerdy and Chegg doing?

Nerdy’s main platform, Varsity Tutors, is an independent marketplace that allows private tutors to teach live lessons in over 3,000 K-12, vocational and adult subjects. It also offers free online courses that can accommodate 500 to 50,000 students at a time.

Chegg’s platform provides online research tools, online tutoring services, digital and physical textbook rentals, and other educational resources. It generates most of its revenue from subscription-based online education services, while the remainder comes from textbook rentals.

How fast is Nerdy growing?

Nerdy’s revenue grew 39% year-on-year to $ 98.6 million in the first nine months of 2021. He expects his revenue to grow by around 35% to reach $ 140 million for the whole year.

Nerdy welcomed 99,287 active learners in the first nine months of 2021, up 51% from a year ago. Its revenue per active learner also increased 1% year-over-year to $ 994, as its number of online sessions jumped 99%.

But if we follow Nerdy’s growth in his first two quarters as a state-owned enterprise, we’ll see that these core growth rates actually slow:

Source: Nerdy. YOY = Year after year.

Nerdy loses momentum as more students return to school in a post-lockdown world. Its turnover per active learner also continues to decline as it offers more free courses to attract new students.

Analysts expect Nerdy’s revenue to increase by 34% in 2021, 39% in 2022, and 34% in 2023. Nerdy is not yet profitable, but analysts expect him to cut back. losses in 2022 before becoming profitable on adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2023.

These growth rates look impressive for a stock that trades at less than four times next year’s sales, but its reputation for pandemic action, the market downturn in PSPC-backed stocks and the induced turnover. Inflation away from speculative, unprofitable tech companies could all limit Nerdy’s gains through 2022.

How fast is Chegg growing?

Chegg’s revenue grew 30% year-over-year to $ 569 million in the first nine months of 2021. But if we follow its quarterly growth in subscribers and Chegg Services (which generated 85% of its revenue in the last quarter), we will notice that its growth is also slowing in a post-containment market.

Source: Chegg. YOY = Year after year.

Last November, Chegg cut its full-year revenue forecast from 25% to 26% growth to 18% to 19%, which surprised investors as the company had already raised its forecast in the first and second quarters. .

This reduction in focus – which Chegg blamed on difficult post-lockdown comparisons, reduced college enrollment rates, and a nationwide labor shortage disrupting turnaround times. its textbook rental business – overshadowed the fact that it reduced its year-over-year net loss in the first nine months, as its adjusted EBITDA rose 58%.

Analysts expect Chegg’s revenue to grow 19% in 2021, 10% in 2022, and 16% in 2023 as its year-over-year growth stabilizes. They also expect it to become profitable on a generally accepted accounting principles (GAAP) basis in 2022, and its net income to increase by 57% in 2023.

Chegg’s outlook appears stable, its shares seem reasonably priced at five times next year’s sales, and it launched a $ 300 million fast-track buyback plan last November. However, it faces many of the same macroeconomic headwinds as Nerdy, as well as other company-specific challenges.

Specifically, Chegg Study – its largest paid service – has been repeatedly accused of helping students cheat by outsourcing their homework issues to online tutors in India. If regulators crack down on the practice, Chegg Services could lose a large chunk of its 4.4 million subscribers. In addition, its textbook rental business could also remain a weak link if college enrollment rates remain sluggish and labor shortages continue.

The winner: nerdy

I’m not a fan of either education stocks yet, as they will both remain out of favor until their year-over-year comparisons stabilize. But if I had to choose one over the other, I would buy Nerdy because it’s smaller, it grows faster, it’s not burdened by a heavy-duty textbook rental company. capital intensive, and that it is not accused of helping students cheat their homework.