4 Keys To The Bull Thesis On Chegg

Online textbook rental innovator and education platform Chegg Inc (NYSE: CHGG) has had a remarkable 2017, with shares up 94 percent year-to-date. Given the vast potential of the online personalized education industry, Chegg's potential ranges beyond just textbooks. A new sell-side initiation report calls for even more growth, citing Chegg as an early mover in the space.

The Analyst

Nithin Pejaver of Citigroup initiated coverage with a Buy rating and $19 price target.

The Thesis

With Chegg expanding at a 26 percent compounded annual growth rate, Nithin Pejaver is positive on the company’s future and highlighted a bull case surrounding four key points:

• A big opportunity: Chegg’s penetration of the addresseable market could be as low as 4 percent.
• Chegg’s business model is a positive feedback loop that aids in new subscriber acquisition and cross-selling.
• High cash conversion (90 percent) that will likely be used for M&A activity.
• A pipeline of new products that are aimed at expanding the addressable marketing and increasing cross-sell opportunities.

Price Action

At last check, shares of Chegg were trading down 1.45 percent at $14.30.

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