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August, 2021

Is The Market Underestimating Chegg (CHGG)?

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Is The Market Underestimating Chegg (CHGG)?

Chegg is an online resource for learners, offering services from homework help, plagiarism checkers, math solvers, Q&A, and even bonus content surrounding a topic a learner would like to master.
 
While many consumers associate the company with online textbook rental/purchase, this is actually a shrinking portion of its business.
 
Chegg boasts 4.9 million subscribers to its services, which now comprise 87% of total revenue. These mentions are captured on the chart below, showcasing continued adoption.
CHGG released a strong report earlier this week, assuaging concerns that demand for its online education resources would wane as students returned to the classroom.
 
The company’s Q2 subscriber base grew at the same pace at its Q2 two-year compounded growth rate — meaning Chegg’s growth wasn’t a Covid-induced anomaly.
 
At LikeFolio, we knew this months ago. We put out a Back to School Early Leaders MegaTrends report at the beginning of July, and CHGG was one of the names featured.
 
Chegg mentions are gaining steam (+214% YoY) as school kicks off, just as we expected.
At the same time, CHGG Sentiment has improved +9 points YoY. Meaning Chegg’s growing userbase is reporting a more positive experience…this is pretty rare.

The company is being bolstered by a lasting shift to digital learning tools.
Mentions of using digital learning tool are 45% higher vs. 2019. Definitely stickiness here.
 
Looking ahead, the company is focusing on a handful of strategic segments:
  • Content: Chegg currently offers 66 million pieces of supplementary educational content, and the company is investing to expand this by paying educators to create on its platform. Examples include practice quizzes, study guides, lecture notes, case studies, lab guides, etc.
  • Advanced Skillsonline professional training and issuing of professional certifications.
Even after a great report, CHGG shares remain 27% lower vs. February highs. The market still may not understand this company is more than online textbooks and cheating on homework.

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