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Is Chegg a buy?

It’s time to talk about another newer name on the block. Here is the breakdown on $CHGG otherwise known as Chegg.

Current Price: $68.20

52/Wk High: $89.82

52/Wk low: $25.89

Read below for the breakdown.

Chegg is an online platform that offers a multitude of learning solutions for students directly.

$CHGG offers services ranging from study help for college admissions exams to finding internships that help students gain skills prior to entering the workforce.

Given that COVID-19 has forced a massive digital switch of the education system across the nation, and the fact that a majority of students today are more technically inclined, the market couldn’t be better for Chegg.

Digging into the numbers Chegg’s last reported earnings for Q2 were fantastic. $CHGG reported a beat, with an EPS of $0.37 versus the expected EPS consensus of $0.32.

Not only that but revenue also came in higher. $CHGG reported revenue of $153 million, which is a whopping 63% YOY growth in revenue.

Furthermore, services revenue also grew steadily. The Q2 reported service revenue came in at a solid $126 million, representing a 57% YOY service revenue growth.

Finally, net income totaled $10.6 million, and adjusted EBITDA rounded out at $55.5 million.

When exploring the balance sheet, Chegg’s solid financial standing shines. While $CHGG does have a total debt of $926 million, management has built a solid cash and short term investment position of $703 million.

Moving into the financial forecast for Chegg, the future couldn’t look better. $CHGG expects Q3 revenue in the range of $140 million to $145 million.

Management also expects Q3 services revenue to fall in the range of $110 million to $115 million with an adjusted EBITDA of $21 million to $23 million.

For the full year, $CHGG expects net revenues of $605 million to $615 million, services revenues of $490 million to $500 million, and an adjusted EBITDA of $190 million to $195 million.

Given all the positivity the analysts are very bullish on $CHGG. Currently, the mean price target is $95.25/share, representing a whopping 40.41% gain.

Secondly, the high price target is $105.00/share, representing a 54.79% upside and the low price target is $79.00/share, representing a 16.46% upside.

The big money is just as bullish on Chegg as the analysts. Currently, 96.66% of $CHGG is owned by institutions. Top holders include Baillie Gifford & Co., BlackRock Institutional Trust, and the Vanguard Group.

Taking a look at the charts the six-month technicals look quite attractive. The RSI currently sits at 39.00 on the six month, which simply based on RSI is not bad. As we all know though, RSI is not everything.

Furthermore, the six-month MACD sits around -0.72 to -0.78 and has been in a long time downtrend momentum. The six month CCI also sits at a low -167.51.

Finally, the stock trades roughly 21 points below its 52/Wk high. Overall, the technicals are very attractive when considering a new position in $CHGG.

In short, I like $CHGG both in the long and short term. It has a lot going for it in the long term digital future. In the short to mid-term, the technology sell-off, if continued, could pull shares lower, but even in the short term, share look cheap.


Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay and Running With The Money are not responsible for any investment made based on the published information.

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