Chegg, Inc. (CHGG) has seen encouraging growth over the past seven months, after a mild dip in February and March 2020. The education technology company has consistently outperformed the S&P 500, rising by approximately 85.7% as of November 13, 2020, compared to the S&P’s gain of about 11%. Chegg also demonstrated its growth through an impressive rise in ranking to three on the WhaleWisdom Heatmap in the third-quarter, up considerably from its previous ranking of 39.
Chegg provides an online educational platform that includes assistance with homework, course selection, tutoring, and textbook rental services. Demand for Chegg’s direct-to-student learning platform has increased during the coronavirus pandemic, in part due to a substantial move by educational institutions to remote learning. As students seek alternatives to a professor’s physical office hours or an in-person tutor, Chegg’s services can prove valuable. It is understandable why Chegg saw strong subscriber growth in the second quarter. This upward momentum continued into the third quarter.
Mixed Q3 Results
Hedge Funds were selling in the third quarter. The aggregate 13F shares held decreased to about 38.6 million from 39.4 million, a decline of approximately 2%. Of the hedge funds, 26 created new positions, 34 added to an existing one, 37 exited, and 40 reduced their stake. In contrast to hedge funds, Chegg caught the eye of institutions. Overall, institutions increased their aggregate holdings by about 4.1% in the third quarter, to approximately 126.5 million from 121.4 million.
Analysts project year-over-year revenue growth of approximately 52.9% for the fiscal year 2020, to $628.2 million in revenue. Positive year over year growth predictions continues through to 2024. There is more good news for share value. The expectation is that earnings will rise to $1.25 by December 2020 and ultimately to $2.41 by December 2023.
The education sector is outperforming the general market; At the same time, some growth may be tied to online schooling during the pandemic. Many new online education models are likely to remain in place for some time, even once the pandemic is over. Analysts see a strong fourth quarter for the company, with growing subscriptions and net revenue estimated between $188 million and $190 million.
Bright Outlook Ahead
Chegg’s impressive growth and future estimates are encouraging for investors. Chegg has reaped benefits from the pandemic’s push toward online learning; what started out as a necessary safety measure during a time of social distancing is likely to remain an integral component of a new educational territory. Investors have had strong motives to acquire shares.