Is Now the Time to Tap Into Chegg Stock?

Chegg, Inc. (NYSE:CHGG) is an American education technology company based in Santa Clara, California. CHGG provides digital and physical textbook rentals, textbook solutions, online tutoring, and other student services. Chegg gears its products towards high school and college students.

Last month, on June 2, CHGG announced a brand new platform for educators and faculty to share their educational content with millions of users. The content will augment and enhance the company's existing "Chegg Study" service that already provides 59 million step-by-step solutions. The goal of the new platform is to help support users with their studies and enhance learner outcomes.

Chegg stock is up 20% year-over-year and has recently been back on the rise from its early June lows, with help from its 10-day moving average. The stock is still slightly below its year-to-date breakeven, with pressure at the 180-day moving average directly overhead, though the stock looks like it could settle north or here today. At last check, CHGG is up 2.7% at $46.42 for the day. 

CHGG has beat or met analyst earnings expectations on all four of its most recent quarterly earnings reports. For Q2 of 2020, Chegg beat analyst estimates by a margin of $0.05. For Q3 of 2020, Chegg beat expectations by a margin of $0.07. For Q4 of 2020, CHGG beat estimates by a margin of $0.06. Finally, for Q1 of 2021, Chegg met expectations with an earnings per share (EPS) of $0.28. Analysts are optimistic that the company will report an increased earnings of $0.37 per share during its next earnings report.

Moreover, Chegg has a sky-high forward price-earnings ratio of 61.35 and a market cap of $11.9 billion even after the stock's recent downward move. Nonetheless, Chegg has continued to grow revenues over the past few years and has increased its revenues by almost 180% since fiscal 2017. Most recently, Chegg has grown its trailing 12-month revenue by 10% compared to its fiscal 2020 revenues. However, this growth rate is below expectations, seeing as the company is still struggling with profitability. Chegg’s trailing 12-month net income currently stands at roughly -$65.7 million, which marks a nearly $60 million decline compared to fiscal 2020, and will likely reflect a change in the company’s pattern of consistent yearly net income growth.

Overall, Chegg stock still maintains positive signs of growth, but its valuation may have outpaced the company by one or two years. There is a possibility that the stock will continue to move lower in the short-term, which could present a good buying opportunity for potential investors.