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Education & Training Services


CHGG $17
​Textbook company Chegg’s market drop following its earnings release was irrational
(03 May 2022) Despite the fact that we like Education and Training Services company Chegg (CHGG $17), we knew it was overvalued when the shares were trading north of $100. Now, after falling some 85%—yes, you read that right—the shares are decidedly undervalued. In fact, one would almost have to assume the company were ready to go out of business to still be bearish at this level, and we expect the company to be around for a long time to come. The catalyst for the pummeling wasn’t rotten numbers for the quarter, it was forward guidance. In fact, Chegg’s revenue rose 2% year-over-year, to $202.2 million in the quarter; and adjusted net income rose 8%, to $50.1 million. Earnings per share easily beat the Street’s estimate of $0.24, coming in at $0.32. Finally, subscriber growth—that wonderful, “sticky” revenue stream—rose by 12%. The problems began to appear when management began talking. Claiming that more people were now focusing on “earning over learning,” CEO Dan Rosensweig warned of rough quarters ahead, lowering full-year revenue guidance from the $830M-$850M range to $740M-$770M. Those figures, and a similar reduction in expected earnings, helped the stock crater to a new 52-week low, falling 30% in one day. Chegg has been aggressively growing its international footprint, offering a direct-to-student learning platform which should continue to increase its market share in a solid industry: education services. While we don’t currently own the company, we believe the shares could easily fetch $35 before long. That would give investors a 100% reward for taking on the risk of owning this small-cap name.
Content copyright 2022, Penn Wealth Publishing, LLC.  All rights reserved.

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Any opinions expressed are those of Penn Wealth Publishing, LLC and are current only through the date posted.  We reserve our First Amendment right to use parody, sarcasm, satire, and irreverent humor to analyze the current state of business, finance, domestic issues, and global affairs; and to speak freely, outside the zeitgeist of political correctness.  These views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.  Past performance is no guarantee of future results.  Always consult your investment professional before investing any money. All attempts to ensure accuracy in the data provided have been made, but always verify at the source before investing. This site is for informational purposes only; Penn Wealth Publishing, LLC is not responsible for any losses incurred. 

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  • Home
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    • Coffee & Cocoa Beans
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    • Sugar
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