Chegg (CHGG) AI Stock Analysis

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Chegg

(NYSE:CHGG)

45Neutral

Chegg's overall stock score of 45 reflects significant challenges. The primary concern is the declining financial performance with negative income trends and high leverage. Technical indicators show bearish momentum, and valuation metrics are unattractive due to negative earnings. Additionally, the earnings call highlighted substantial revenue and subscriber declines, while the NYSE delisting notice adds further risk. Despite some strategic advancements, these factors collectively weigh heavily on the stock's prospects.

Positive Factors

Market Reach Expansion

Progress on international localization efforts could expand Chegg's market reach and customer base.

Marketing Strategy

Chegg's diversifying marketing strategy in an evolving environment suggests adaptability and potential for growth.

Strategic Alternatives

Chegg has filed a complaint against Google and Alphabet and intends to explore strategic alternatives, which has the potential to unlock shareholder value.

Negative Factors

AI Competition

The company's AI-fueled struggles continue as Google AIO negatively impacts web traffic.

Revenue Guidance

Chegg's Q1 guidance came in well below consensus, indicating further degradation across revenue growth and margin.

Subscriber Trends

Declining negative growth and subscribers missing expectations supported the Underweight thesis for Chegg Inc.

Chegg (CHGG) vs. S&P 500 (SPY)

Market Cap

$76.37M

Dividend YieldN/A

Average Volume (3M)2.28M

Price to Earnings (P/E)―

Beta (1Y)1.37

Revenue Growth-13.78%

EPS Growth-5297.96%

CountryUS

Employees1,241

SectorTechnology

Sector Strength65

IndustryEducation & Training Services

Share Statistics

EPS (TTM)0.17

Shares Outstanding105,376,976

10 Day Avg. Volume1,476,494

30 Day Avg. Volume2,282,777

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap4.66

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit0.82

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$1.30

Price Target Upside83.10% Upside

Rating ConsensusModerate Sell

Number of Analyst Covering7

Chegg Business Overview & Revenue Model

Company DescriptionChegg, Inc. is an education technology company based in the United States that provides digital and physical textbook rentals, online tutoring, and other student services. Operating primarily in the education sector, Chegg offers a variety of resources to help students succeed in their academic pursuits, including study help, writing assistance, and learning tools through its online platforms.

How the Company Makes MoneyChegg makes money through a subscription-based model, primarily driven by its Chegg Services, which include Chegg Study, Chegg Writing, and Chegg Tutors. These services offer students access to step-by-step textbook solutions, expert Q&A, plagiarism checks, and personalized tutoring. Additionally, Chegg generates revenue from textbook rentals and sales, both digital and physical. The company also partners with educational content providers and institutions to expand its offerings and reach. Subscription fees and rental transactions are the key revenue streams, with the majority of earnings coming from recurring subscription payments.

Chegg Key Performance Indicators (KPIs)

Any

Subscribers

Subscribers
Monitors the number of active users subscribed to Chegg's services, indicating customer engagement, market reach, and potential for revenue growth through subscription fees.

Chart InsightsChegg's subscriber base has significantly declined from its peak in 2022, with a 21% drop in 2024 alone, largely due to Google's AI Overview impacting traffic. Despite integrating AI to reduce costs and launching successful marketing campaigns, these efforts have not offset the subscriber losses. The company is focusing on restructuring to achieve substantial savings and expand its enterprise offerings, but the ongoing legal challenge against Google underscores the severity of the competitive pressures it faces.

Data provided by:

Main Street Data

Chegg Financial Statement Overview

Summary

Chegg's financials indicate significant headwinds. The income statement shows declining revenues and profitability, while the balance sheet reflects high leverage and decreasing equity. Although cash flow from operations remains strong, the negative trends in profitability and equity raise concerns about financial stability and growth prospects.

Income Statement

―

Chegg's income statement reveals significant challenges. Both Gross Profit Margin and Net Profit Margin have deteriorated, with the latter turning negative in the most recent year. The Revenue Growth Rate has been negative over the last two years, indicating declining revenues. Additionally, EBIT and EBITDA margins have turned negative, reflecting operational inefficiencies and potential cost management issues.

Balance Sheet

The balance sheet shows a decrease in Stockholders' Equity and Total Assets over time. The Debt-to-Equity Ratio remains high, indicating significant leverage. The Return on Equity has turned negative, aligning with recent net losses. The Equity Ratio has decreased, reflecting a reduced proportion of equity in the company's asset base, suggesting higher financial risk.

Cash Flow

―

Chegg's cash flow presents a mixed outlook. Free Cash Flow has declined, but the company still maintains positive Operating Cash Flow. The Operating Cash Flow to Net Income Ratio is high due to negative net income. Despite the challenges, the company's ability to generate cash from operations remains a positive aspect.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
617.57M	716.29M	766.90M	776.26M	644.34M
	Gross Profit
436.65M	490.35M	569.50M	521.36M	438.92M
	EBIT
-737.11M	-67.72M	109.99M	12.63M	56.75M
	EBITDA
-607.43M	183.80M	105.79M	86.77M	127.85M
	Net Income Common Stockholders
-837.07M	18.18M	266.64M	-1.46M	-6.22M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
315.72M	330.01M	1.06B	1.55B	1.15B
	Total Assets
868.95M	1.73B	2.47B	2.92B	2.25B
	Total Debt
504.46M	617.90M	1.20B	1.69B	1.53B
	Net Debt
342.98M	482.14M	728.29M	836.52M	1.05B
	Total Liabilities
675.97M	782.62M	1.35B	1.81B	1.64B
	Stockholders Equity
192.98M	944.62M	1.12B	1.11B	609.63M
Cash Flow		Free Cash Flow
50.25M	163.15M	152.64M	179.04M	155.13M
	Operating Cash Flow
125.20M	246.20M	255.74M	273.22M	236.44M
	Investing Cash Flow
11.35M	268.67M	104.89M	-365.77M	-732.79M
	Financing Cash Flow
-109.14M	-852.77M	-744.80M	466.72M	588.63M

Chegg Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price0.71

Price Trends

50DMA

0.70

Positive

100DMA

1.16

Negative

200DMA

1.61

Negative

Market Momentum

MACD

0.01

Negative

RSI

55.75

Neutral

STOCH

77.05

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CHGG, the sentiment is Neutral. The current price of 0.71 is above the 20-day moving average (MA) of 0.61, above the 50-day MA of 0.70, and below the 200-day MA of 1.61, indicating a neutral trend. The MACD of 0.01 indicates Negative momentum. The RSI at 55.75 is Neutral, neither overbought nor oversold. The STOCH value of 77.05 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CHGG.

Chegg Risk Analysis

Chegg disclosed 48 risk factors in its most recent earnings report. Chegg reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Chegg Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LAUR	74 Outperform	$3.37B	12.06	31.14%	―	1.26%	140.30%
COUR	73 Outperform	$1.40B	―	-10.84%	―	7.26%	39.62%
UDMY	61 Neutral	$963.78M	―	-27.17%	―	5.43%	14.22%
Sector *	60 Neutral	$10.77B	10.41	-6.71%	2.99%	7.69%	-13.12%
DAO	54 Neutral	$1.06B	93.10	25.15%	―	3.01%	―
GOTU	54 Neutral	$833.35M	―	-41.45%	―	51.50%	-70812.50%
CHGG	45 Neutral	$76.37M	―	-147.16%	―	-13.78%	-5297.96%

* Technology Sector Average

Performance Comparison

CHGG

Chegg

0.71

-4.22

-85.60%

LAUR

Laureate Education

22.87

6.55

40.13%

GOTU

Gaotu Techedu

3.25

-4.05

-55.48%

DAO

Youdao

8.85

5.06

133.51%

COUR

Coursera

8.77

-0.37

-4.05%

UDMY

Udemy Inc

6.51

-3.63

-35.80%

Chegg Earnings Call Summary

Earnings Call Date:Feb 24, 2025

(Q4-2024)

% Change Since: -54.49%|

Next Earnings Date:May 12, 2025

Earnings Call Sentiment Negative

The earnings call reflected a mixed sentiment. While Chegg showcased significant advancements in AI integration, enterprise growth, and marketing strategies, these were overshadowed by considerable declines in revenue and subscriber numbers, largely attributed to Google's AI Overview impacting traffic. The company's strategic review process and legal action against Google highlight the seriousness of the challenges faced.

Q4-2024 Updates

Positive Updates

AI and Machine Learning Integration

Chegg successfully integrated AI and machine learning into its product stack, reducing content creation costs by more than 70% while maintaining high quality.

Busuu Revenue Growth

The language learning service Busuu experienced a 9% year-over-year revenue growth for 2024, with a 46% increase in enterprise revenue.

Satisfaction Guarantee Implementation

Chegg implemented a Satisfaction Guarantee for its content, showing confidence in its quality and maintaining high standards.

Innovative Marketing Campaign

A brand marketing campaign on TikTok resulted in a 16% increase in awareness among underclassmen, improving click-through and conversion rates.

Enterprise Strategy Expansion

The enterprise part of Chegg's business is performing well, with a plan to expand business-to-institution programs and other enterprise offerings.

Negative Updates

Revenue and Subscriber Decline

Total revenue for Q4 2024 was $143.5 million, a decrease of 24% year-over-year, with subscription services revenue down 23% and subscribers declining by 21%.

Impact of Google's AI Overview (AIO)

Google's AIO has significantly impacted Chegg's traffic, revenue, and workforce, leading to a 49% drop in non-subscriber traffic in January 2025.

Challenges in Skills and Other Revenue

Skills and other revenue declined by 31% year-over-year due to a market shift away from traditional boot camps and reduced advertising revenue.

Temporary Retention Rate Dip

A temporary dip in retention rate during November and December affected subscription services ARPU, which decreased by 3% year-over-year.

Company Guidance

During Chegg, Inc.'s Fourth Quarter 2024 Earnings Conference Call, the company provided detailed guidance metrics for the upcoming quarter and year. Chegg reported a total revenue of $143.5 million for Q4 2024, a 24% year-over-year decrease, with subscription services contributing $128.5 million, down 23%. The company had 3.6 million subscribers, a decline of 21%, and subscription services ARPU fell by 3% year-over-year. For the first quarter of 2025, Chegg expects total revenue between $114 million and $116 million, with subscription services revenue ranging from $104 million to $106 million. They anticipate a gross margin of 66-67% and an adjusted EBITDA between $13 million and $14 million. Despite challenges such as a drop in nonsubscriber traffic and revenue impact from Google's AI Overviews, Chegg remains focused on stabilizing business trends and achieving 2025 non-GAAP savings of $100 million to $120 million through restructuring activities.

Chegg Corporate Events

Delistings and Listing ChangesStock Split

Chegg Faces NYSE Delisting Notice for Low Share Price

Negative

Apr 4, 2025

On April 1, 2025, Chegg, Inc. received a notice from the New York Stock Exchange (NYSE) for non-compliance with the minimum share price requirement, as its average closing share price was below $1.00 over a 30-day period. The company intends to regain compliance within a six-month cure period, potentially through a reverse stock split, and will continue to trade on the NYSE during this time. Failure to comply could lead to suspension and delisting procedures.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.