Chegg Inc

Chegg, Inc. (NYSE: CHGG) provides a student-first connected learning platform. The Company is combining generative artificial intelligence (AI) and human capabilities to provide a personalized learning assistant to be included in its Chegg Study offering. Its service and product offerings fall into two categories: Subscription Services, which encompasses its Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings that can be accessed internationally through its websites and on mobile devices, and Skills and Other, which encompasses its Chegg Skills, advertising services, print textbooks and eTextbooks offerings.

Recent Business and Financial Updates

• Chegg Announces Comprehensive Restructuring Plan: Chegg announced a restructuring plan and published a Shareholder Letter outlining its strategy to refocus on its core audience—students—and provide comprehensive support to learners globally. The company aims to differentiate itself with holistic and individualized product offerings, blending academic and functional support, including organizational proficiency, early career learning, financial literacy, and community engagement into a single, affordable platform. Chegg's unique approach will leverage artificial intelligence tailored for education, a proprietary learning model, and a vast repository of content supported by subject matter experts, ensuring quality and comprehensive support services.
• Strategic Initiatives and Financial Outlook: As part of the restructuring, Chegg will reduce its global workforce by 23%, resulting in the departure of 441 employees, and close two offices outside the United States. This move aims to streamline operations, enhance efficiency, and align expenses with near-term revenue trends. The restructuring is expected to save USD 40 million to USD 50 million in non-GAAP expenses for 2025, contributing to the company's goal of achieving a 30%+ Adjusted EBITDA margin and generating at least USD 100 million in Free Cash Flow. Chegg will also focus on expanding its international program, diversifying distribution channels, and simplifying systems and processes to leverage best-in-class software for non-core applications. The company anticipates a restructuring charge of USD 10 million to USD 14 million, with substantial charges incurred by the fourth quarter of 2024.
• Chegg, Inc. announced that its Compensation Committee granted equity awards under the Chegg 2023 Equity Inducement Plan on June 12, 2024, pursuant to NYSE Rule 303A.08. Two newly hired employees received restricted stock units (RSUs) totaling 32,797 shares of Chegg common stock. For one employee, 728 RSUs will vest in thirds over 36 months, while for the second employee, 32,069 RSUs will vest half after 12 months and the remainder quarterly over the following 12 months.
• Financial Results for Q1 2024: Chegg, Inc. reported financial results for the three months ended March 31, 2024. Total net revenues were $174.4 million, reflecting a 7% year-over-year decrease. Subscription Services revenues were $154.1 million, down 9% from the previous year. The company reported a gross margin of 73%, with a non-GAAP gross margin of 75%. Chegg's net loss for the quarter was $1.4 million, while non-GAAP net income was $29.6 million, and adjusted EBITDA stood at $46.7 million. The number of Subscription Services subscribers was 4.7 million, marking an 8% year-over-year decline.
• Leadership Transition and Strategic Focus: Dan Rosensweig, CEO & President of Chegg, Inc., highlighted Nathan Schultz's critical role in the company's evolution from a textbook rental service to an AI-driven personalized learning assistant. As Schultz steps in as the new CEO & President, Rosensweig expressed optimism about Chegg's future, driven by its new AI-enabled platform aimed at serving more students in diverse ways. Schultz emphasized the successful rollout of AI-enabled experiences in the first quarter, aimed at increasing value to students and expanding the audience reach. The company is also focusing on aligning its expense base with current revenue trends, targeting a 30% or greater Adjusted EBITDA margin for 2025.
• Business Outlook for Q2 2024: Chegg's business outlook for the second quarter of 2024 includes total net revenues projected to be between USD 159 million and USD 161 million, with Subscription Services revenues expected to range from USD 144 million to USD 146 million. The gross margin is anticipated to be between 70% and 71%, and adjusted EBITDA is forecasted to be in the range of USD 38 million to USD 40 million. The company's strategic investments and financial adjustments are geared towards enhancing its product-market fit and financial performance in the coming quarters.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands with value of 27.63, with expectations of a consolidation. Additionally, the stock's current positioning is below both the 50-period SMA and 200-period SMA, which may serve as dynamic short to medium-term resistance levels.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is June 18, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.