RayJay: Chegg's Q4 Print, Guidance Reflect Strong Positioning, Momentum — And So Does The Share Price

Chegg Inc CHGG reported solid fourth-quarter results and raised its 2019 guidance Monday

The company enjoys a leading position as an online student platform, and the fundamental outlook for Chegg Services — particularly Chegg Study — remains positive, according to Raymond James.

The Analyst

Raymond James’ Aaron Kessler maintains a Market Perform rating on Chegg.

The Thesis

Chegg reported Q4 total revenue of $95.7 million, significantly ahead of the consensus estimates and guidance.

The strength was driven by Chegg Services, which delivered 35-percent year-on-year revenue growth and 38-percent subscriber growth.

The company also announced an exclusive partnership with online writing lab Purdue OWL. The integration will enhance Chegg Writing’s offering and help expand the product’s customer acquisition funnel, Kessler said in a Tuesday note. 

Chegg guided to Q1 revenue of $93.5-$95.5 million, higher than the consensus expectation of $93.3 million. The company also made an upward revision to its 2019 revenue guidance, from $388 million to $390-$395 million.

Raymond James raised the revenue and EBITDA estimates for 2019 from $388 million to $394 million and from $113 million to $117 million, respectively, to reflect the higher guidance and strength at Chegg Services.

While the prospects for Chegg are bright, the shares already reflect most of this potential, Kessler said. 

Price Action

Chegg shares were rallying 9.66 percent to $38.15 at the time of publication Tuesday. 

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