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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