CHGG - Embedded Expectations Analysis - 2020 04 13
ï€ Chegg, Inc. (CHGG:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 33.1x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and management may have concerns about scale, their business model, and customer support servicesï€ Specifically, management may lack confidence in their ability to sustain free cash flow performance, run their Required Materials business profitably, and invest in growth initiatives. Moreover, they may be exaggerating their ability to reduce account sharing, the potential of the Chegg Study Pack, and the quality of their education support. In addition, management may lack confidence in their ability to expand the brand domestically and globally, and capitalize on online education tailwinds. They may also be downplaying concerns about B2B market competition. Finally, they may be exaggerating the resiliency of their business model, and they may have concerns about the impact of regulatory changes to programmatic advertising.
Chegg provides products and services that help students improve their outcomes throughout their educational journey. The company's offerings fall into two categories: Chegg Services, which encompasses all of its digital products and services such as Chegg Study, Chegg Writing, Chegg Tutors, Chegg Math Solver, and Other Services; and Required Materials, which primarily includes its print textbook and eTextbook offering. To deliver services to students, the company partners with a variety of third parties. The company sources print textbooks, eTextbooks, and supplemental materials directly or indirectly from publishers including Cengage Learning, Pearson, McGraw Hill, Sage Publications, and MacMillan.
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