UPDATE: Piper Jaffray Initiates Coverage on Chegg on Confidence In Growth Trajectory
In a report published Monday, Piper Jaffray analyst Michael J. Olson initiated coverage on Chegg (NYSE: CHGG) with an Overweight rating and $11.00 price target.
In the report, Piper Jaffray noted, “We are initiating coverage of CHGG with an Overweight rating and $11 price target. While Chegg has had a rocky start as a publicly traded company, pricing at $12.50 on 11/13 and declining to $7.50 within two weeks, we believe the fundamentals of the business remain solid. Chegg is positioned to continue to grow its textbook rental business (80% CY13E revenue), using it as a foundation for growth of ‘digital' offerings. By CY15, we expect 35% of Chegg revenue will be unrelated to print textbook rentals, a clear positive as the various digital revenue streams have significantly higher gross margins and less competition. We believe Chegg is uniquely positioned to address and benefit from many of the challenges facing the higher education process. Our confidence in ongoing revenue growth in the 20%+ range is high and we are assigning a multiple of 20x EV/2015E EBITDA to arrive at a price target of $11.”
Chegg closed on Friday at $9.57.
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