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

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.

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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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