Chegg Shares Dip On Analyst Warnings About Subscriber Numbers, Rising Competition

Zinger Key Points
  • Chegg faces downgrade to underweight amid weakening web traffic and app downloads.
  • Analyst predicts negative revisions for Chegg in 2024-2025 due to high consensus estimates.

Shares of Chegg Inc CHGG were falling on Monday, just days after the company announced a $150 million buyback.

While web traffic and app download data trends weakened in October, the stock has rallied more than 40% since end of last month, according to Morgan Stanley.

The Chegg Analyst: Josh Baer downgraded the rating for Chegg from Equal-Weight to Underweight, while lowering the price target from $10 to $9.

The Chegg Thesis: The consensus estimates appear “too high,” creating the risk of negative revisions in 2024 and 2025, Baer said in the downgrade note.

Check out other analyst stock ratings.

Although the fourth-quarter guidance seems to imply a "return to normal," the sequential subscriber trends versus pre-covid average seasonality “have worsened each quarter in 2023,” the analyst wrote.

“Impacts from intensifying GenAI competitive landscape still to come as those students with more history/allegiance to Chegg graduate,” Baer stated. There is “potential for an unexpected shift from an ARPU tailwind to an ARPU headwind,” he added.

CHGG Price Action: Shares of Chegg were down 6.9% to $9.74 at the time of publication Monday.

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Posted In: Analyst ColorDowngradesPrice TargetSmall CapAnalyst RatingsMoversTrading IdeasExpert IdeasJosh Baer
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