Chegg
CHGG
began as an online textbook hub for college students and has expanded into a diverse digital educational company. CHGG was already growing its subscriber base for offerings such as test prep in a world where students do so much work and studying online. Then the coronavirus remote schooling push highlighted its business model.
Digital Students…
CHGG still sells discounted textbooks, which is a solid niche with an e-commerce space dominated by Amazon
AMZN
. More importantly, for its growth and long-term success, CHGG has transformed into a “direct-to-student learning platform” that offers online tutors, test prep, job and internship search platforms, and much more.
Students of all ages hope they will be able to return to classrooms and lecture halls sooner than later. But no matter what happens, studying and learning outside of structured environments is taking place digitally, as students look for extra help and practice on platforms such as YouTube
GOOGL
.
Chegg’s fiscal 2018 sales jumped 26%, with FY19 up 28%, as more students turned to its expandeddigital offerings. And Chegg’s Q1 fiscal 2020 revenue climbed 35%.
Then it Q2 sales surged 63% and its subscribers jumped 67% to 3.7 million. “The COVID-19 pandemic has accelerated that shift and it is now clear that learning tools and academic support must be available online, affordable, on-demand, tailored to the individual learner, and geared towards the skills needed in the modern workforce,” CEO Dan Rosensweig said in prepared Q2 remarks.
Looking ahead, Zacks estimates call for CHGG’s Q3 revenue to jump 53%, with Q4 projected to come in another 47% higher. On top of that, Chegg’s sales are projected to climb 50% in FY20 to reach $612.9 million and another 25% in FY21 to hit $765.4 million.
Meanwhile, Chegg’s adjusted fiscal year EPS figure is projected to jump 40% in FY20 to come in at $1.27 per share and another 24% in fiscal 2021. Chegg has also topped our bottom-line estimates by an average of 40% over the trailing four periods.
Bottom Line
Chegg shares have soared over 1,000% in the past five years. This run includes a 240% climb over the last two years and a 130% jump in 2020. CHGG currently rests right near its high at around $87 per share heading into its Q3 earnings release on October 26.
CHGG is a Zacks Rank #3 (Hold) at the moment that has plans to continue expanding its online learning offerings in our digital world. Plus, the stock trades at a discount against its peer group at 14.6X forward 12-month sales vs. 18.6X. For reference, fellow pandemic high-flyer Zoom Video
ZM
trades at 51X and Shopify
SHOP
comes in at 39X.
Clearly, some investors might want to wait for its report and there could be near-term selling pressure. Yet, Chegg might be worth considering as a longer-term buy. Investors should also remember that college tuition continues to skyrocket and college debt grows out of control, which might create even more of a groundswell for digital learning platforms.
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