Bull of the Day: Chegg (CHGG)

Chegg Inc. (CHGG) is an education technology company that provides supplementary material for primarily college students. The company rents and sells textbooks, provides eTextbooks, homework help, textbook buybacks, courses, and college admissions and scholarship services.

Q1 Earnings Soar Past Expectations

Chegg reported strong first-quarter results earlier this month, and the top and bottom line easily beat the consensus estimates.

Adjusted earnings grew 40% year-over-year to 22 cents per share, while revenue jumped 35% to $132 million.

Chegg Services subscribers hit 2.9 million, also up 35% from the prior-year period, and there were 253 million total Chegg Study content views during the quarter.

Chegg’s CFO Andy Brown said the company was comfortable giving guidance for the second quarter, and is forecasting total revenues in the range of $135 million and $137 million.

But because of the general uncertainty about the pandemic, and colleges reopening campuses in the fall, Chegg is not updating their outlook for the second half of 2020.

CHGG is Soaring

 

Chegg, Inc. Price and Consensus

 

Year-to-date, shares of CHGG have surged about 64% compared to the S&P 500’s 8.7% decline. Earnings estimates have been rising, and Chegg is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, six analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 14 cents to $1.21 per share; earnings are expected to increase 33% compared to the prior year period. 2021 looks strong as well, with earnings expected to continue double-digit year-over-year growth.

Because the pandemic has forced all education levels to be online, Chegg is poised to benefit. Its Services segment provides tools that help both traditional students and those wanting to learn valuable work skills; it also offers online tutoring in subjects like writing and math, all of which will likely be in high demand if classes remain online any longer

If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep CHGG on your shortlist.

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