Chegg Q3 Earnings Preview: What The Street Expects From EdTech Stock

Direct-to-student learning platform company Chegg Inc CHGG would be reporting its third-quarter earnings, after market close on Monday. Here’s what investors need to know ahead of the quarterly report.

Chegg Q3 Earnings: What Analysts Are Watching

Overall, Chegg’s financial performance looks concerning: decreasing demand for the Chegg platform and increasing competition from the mushrooming of EdTech firms over the recent years have made it difficult for Chegg to grow its revenues on a year-on-year basis, especially since 2020.

Subscription revenues have been on a decline owing to increased competition and the emergence of artificial intelligence tools such as ChatGPT.

Although Chegg itself is foraying into AI in an attempt to offer enhanced capabilities to students thereby adding value to its current value proposition, analysts see it more as a cost burden than a revenue source at least for the initial years.

Related: Chegg Partners with Scale AI to Enhance Learning Experience for Students

Although the company has been trying to optimize costs at the product level, operating expenses have been impacting its bottom line.

Chegg Earnings Estimates: Wall Street analysts expect Chegg to report earnings per share of 71 cents for the quarter and $152.67 million in revenue, per earnings data available on Benzinga Pro. Given Chegg’s history of beating estimates, the Street expects Chegg to record a beat on EPS and revenue this time as well.

Over the last 12 quarters, Chegg stock has delivered 10 positive EPS surprises and 10 positive revenue surprises.

Analysts project that Chegg will report $1.08 in EPS for the fiscal year ending December 2023. Revenue estimates for that period are currently expected to come in at $708.26 million.

Chegg Analyst Ratings, Price Targets: Wall Street analyst ratings— based on a pool of 120 analyst firms over the last three years — currently rate the stock Market Perform. The consensus price target stands at $12.63 per share.

In October, the Street saw two analysts lower their ratings for the stock. Doug Anmuth of JPMorgan lowered his price target for the stock from $14 to $12. Josh Baer of Morgan Stanley lowered his price target on the stock from $13 to $10.

CHGG Price Action: Chegg shares have been rangebound between $8.10 and $8.75 over the last month, and closed at $8.48 on Friday. The 52-week range is a low of $8.08 and a high of $30.05. The stock may be trading near its 52-week lows, but analysts may not see it as a value pick given the company’s troubled financials. Trading at a P/E of just 7.86, this stock is likely cheap for a reason.

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