Chegg Stock Analysis: Is it Worth Investing in CHGG?

Chegg Stock Analysis: Is it Worth Investing in CHGG?

Table of Contents

1. Introduction
2. Brief Description of Chegg Inc.
3. Renting Textbooks
4. Online Tutoring Services
5. Subscription Service to Textbook Solutions
6. Earnings Reports and Future Growth
7. Fund Ownership
8. Technical Analysis
9. Potential Entry Points
10. Conclusion

Introduction

In this article, we will be discussing Chegg Inc., a promising growth stock that provides digital products and services to foster online education. As more colleges transition to online learning due to the Current pandemic, Chegg's offerings become increasingly Relevant. We will explore the various components of Chegg's business, such as renting textbooks, online tutoring services, and their subscription service to textbook solutions. Additionally, we will analyze Chegg's fundamentals, including earnings reports and future growth estimates. We will also consider fund ownership and conduct technical analysis to determine potential entry points for investors. By the end of this article, You will have a comprehensive understanding of Chegg Inc. and its potential as an investment opportunity.

Brief Description of Chegg Inc.

Chegg Inc. is a company that specializes in providing digital products and services to support online education. In an era where colleges are shifting to online learning, Chegg offers a range of solutions to facilitate this transition. Their services include renting textbooks, online tutoring in various subjects, and a subscription service for textbook solutions. By catering to the needs of students and educators in the digital realm, Chegg has positioned itself as a leading provider in the online education sector.

Renting Textbooks

As a college student, the cost of textbooks can be a significant burden. Chegg addresses this issue by offering textbook rental services at a reasonable price. Through their partnership with Pearson, they provide a wide selection of textbooks commonly used in college courses. By renting textbooks by the semester instead of purchasing them outright, students can save hundreds of dollars. Chegg also offers the option to purchase new or used editions of textbooks, as well as downloadable e-textbooks for added convenience. As an added bonus, they provide a free four-week trial of their online study program, further enhancing their value proposition for potential clients.

Online Tutoring Services

Chegg's online tutoring services cover various subjects, including engineering, math, science, humanities, high school classes, and test preparation. Particularly in the realm of test preparation, such as standardized tests like the SAT or ACT, students are willing to invest in additional knowledge to improve their scores. As online education becomes more prevalent, these tutoring services are expected to become increasingly valuable. By offering personalized and convenient online tutoring options, Chegg has positioned itself to tap into this lucrative market.

Subscription Service to Textbook Solutions

The Core component of Chegg's business is their subscription service to textbook solutions. These solutions provide step-by-step guidance through textbook problems, which proves especially useful in technical disciplines like engineering. As more colleges and universities emphasize online learning and textbooks, Chegg is well-positioned to benefit from this transition. By offering comprehensive textbook solutions, Chegg aims to support students in their academic endeavors and alleviate any challenges they may face in understanding complex subject matter.

Earnings Reports and Future Growth

Chegg has demonstrated impressive growth in recent quarters, with a 40% increase in sales and a 22% rise in after-tax margins. The company's strong financial performance is further supported by upward revisions in future growth estimates. The estimates indicate a 24% growth rate for 2020 and an additional 20% for 2021. These positive trends solidify Chegg's potential for continued success in the online education industry.

Fund Ownership

Analysis of fund ownership provides Insight into how institutional investors view a company. Chegg has experienced steady growth in funds buying shares over the past two years, indicating confidence from high-quality funds. Investing alongside these institutional investors increases the likelihood of successful trades. Furthermore, the relative strength (RS) rating of 97 indicates that Chegg has outperformed 97% of stocks over the past year, confirming its market strength.

Technical Analysis

By examining the technical indicators, we can identify potential entry points for Chegg. The monthly Chart shows that the stock is in a long-term uptrend, having shown considerable progress since its initial public offering (IPO). On the daily chart, significant institutional support is evident through a breakout on extraordinary volume following earnings. A possible entry point would be a breakout above the pivot price or when a green dot forms. These technical aspects indicate favorable conditions for investors considering Chegg.

Potential Entry Points

Based on the technical analysis, potential entry points for Chegg could occur when the stock breaks above the pivot price or when a green dot appears. By buying a half position when a green dot forms and adding the remaining half when the stock breaks through the pivot price, investors can strategically approach their investment in Chegg. Furthermore, Chegg has shown resilience during market downturns, making it an attractive option for investors seeking stability.

Conclusion

Chegg Inc. is a compelling growth stock within the online education sector. Their offerings, such as renting textbooks, online tutoring services, and a subscription service to textbook solutions, address the evolving needs of students and educators. With strong fundamentals, positive growth estimates, and notable fund ownership, Chegg presents an attractive investment opportunity. By leveraging technical analysis and identifying potential entry points, investors can make informed decisions about including Chegg in their portfolios. As the demand for online education continues to increase, Chegg is well-positioned to thrive in this evolving landscape.

Highlights:

• Chegg Inc. provides digital products and services to support online education.
• Their offerings include renting textbooks, online tutoring services, and a subscription service to textbook solutions.
• Chegg's strong fundamentals and positive growth estimates make it a promising growth stock.
• Institutional investors have shown a steady increase in buying shares of Chegg.
• Potential entry points can be identified through technical analysis, such as breakouts and green dot formations.

FAQ

Q: How does Chegg's textbook rental service work? A: Chegg allows students to rent textbooks for a reasonable price, saving them money compared to purchasing them outright. Students can rent physical textbooks or access e-textbooks for added convenience.

Q: Does Chegg offer tutoring services? A: Yes, Chegg provides online tutoring in various subjects, including math, science, humanities, and test preparation. Students can receive personalized assistance to enhance their understanding and improve their academic performance.

Q: How does Chegg's subscription service to textbook solutions help students? A: Chegg's subscription service offers step-by-step solutions to textbook problems, which proves particularly beneficial for technical disciplines like engineering. By providing comprehensive guidance, Chegg supports students in their learning journey.

Q: What are the growth prospects for Chegg? A: Chegg has demonstrated strong growth in recent quarters, with positive earnings reports and upward revisions in future growth estimates. As online education becomes more prevalent, Chegg is well-positioned to benefit from this transition.

Q: How can investors identify potential entry points for investing in Chegg? A: Investors can use technical analysis to identify potential entry points, such as breakouts above pivot prices or the formation of green dots. These indicators suggest favorable conditions for investing in Chegg.