Chegg's Organic Growth Remains Challenged, Says Morgan Stanley Analyst

  • Morgan Stanley analyst Josh Baer reiterated an Equal-Weight rating on the shares of Chegg Inc CHGG and raised the price target from $22 to $24.
  • Josh Baer highlighted that Chegg is building back investor confidence after a second straight beat and raise quarter on both the top and bottom line.
  • However, he noted that organic growth remains challenged as Chegg Services revenue decelerated to only 2% Y/Y organic growth in Q3 from more than 3% last quarter.
  • He pointed out that management highlighted levers to support an improving growth profile going forward, including trends in U.S. undergraduate enrollment that appear to have stabilized and returned to pre-pandemic levels.
  • ARPU – from modest price increase in base product showing no adverse impact to conversion or retention rates and even driving more adoption of the higher-priced Study Pack bundle.
  • Also, progress in international, calling out increased engagement in Turkey after launching a fully localized app, the analyst added.
  • He said that a Spanish language app in beta could help support future growth internationally.
  • Price Action: CHGG shares are trading higher by 25.15% at $26.42 on the last check Wednesday.
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