Analysts at Needham said the stock rose on Monday after the education services provider’s quarterly subscriber turnout expected better-than-expected numbers.
Needham raised his rating on the stock to buy and set a $28 price target on Monday.
Chegg (ticker: CHGG) was one of the companies loved by the pandemic, as online study was booming alongside education at home. But as schools reopen, Chegg warned investors on several occasions that its enrollment numbers in courses would be affected. Its stock has fallen 33 per cent this year.
Earlier last month, the company said its Chegg Services segment, which focuses on helping students write math and homework, would generate revenue of up to $155 million in the third quarter. For Needham’s Ryan McDonald and other analysts tracking the stock, that implies a sequential decline of nearly 500,000 customers compared to the second quarter, according to FactSet.,
But based on financial aid applications sent out by high school seniors seeking college enrollment, McDonald is confident that management’s numbers are conservative. Instead, it is assumed that the decline will be only 140,000, and subscriber growth revenue, in the fastest case, will be around $178.5 million and in the worst case, $158.6 million, he pointed out. baron’s,
As of June 30 — the typical deadline for the Free Application for Federal Student Aid, or FAFSA, application-submissions were up 4.5% from the prior filing year.
Strong trends in continuing education bodes well for the industry, and Chegg in particular. McDonald’s notes that FAFSA applications have been a relatively consistent indicator for college enrollment, with about 95% of freshmen’s enrollments tied to them over the past four years.
Chegg’s stock rose 7% to $20.23 on Monday following Needham’s report.
“We’ve seen a return to the more normal pattern of returning to college,” Macdonald said, with many students opting to postpone education last year. He attributed the decisions of the students to the Red Hot labor market taking a gap year in 2021.
In May last year, the job opening rate held steady at a record 6%. Comparatively, hiring has been impacted this year. Last week, Walmart (ticker: WMT) said it was hiring 40,000 associates in a variety of seasonal and full-time roles, up from 150,000 positions last year to meet holiday demand.
According to FactSet, Chegg is expected to report third-quarter earnings on October 31.,
The company expects total revenue to be in the range of $156 million to $160 million. Analysts tracked by FactSet are expecting $158.3 million.
Write to Karishma Vanjani at [email protected]
Credit: www.marketwatch.com /