Chegg Inc

Chegg, Inc. (NYSE: CHGG) provides products and services to learners with academic course materials, as well as career and personal skills development. The Company’s service and product offerings fall into two categories: Subscription Services and Busuu.

Recent Financial Update:

• The company reported a total net revenue of USD 187.6 million, indicating a 7% decrease compared to the previous year. Subscription services revenues declined by 3% year-over-year, amounting to USD 168.4 million, which accounted for 90% of the total net revenues, an increase from 86% in Q1 2022.
• CHGG achieved a net income of USD 2.2 million, while the non-GAAP net income reached USD 38.1 million. Additionally, the adjusted EBITDA stood at USD 57.6 million.
• Despite the slight decrease in subscription services subscribers by 5% to 5.1 million, CHGG's performance remained solid.
• Moving forward to the second quarter of 2023, CHGG provided projected figures for the period. Total net revenues are expected to be in the range of USD 175 million to USD 178 million, with subscription services revenues projected between USD 159 million and USD 162 million. The gross margin is anticipated to fall between 72% and 73%, while adjusted EBITDA is estimated to range from USD 53 million to USD 55 million.
• CHGG's first quarter results surpassed revenue and adjusted EBITDA guidance, delivering robust cash flow. Gross margin exceeded expectations, contributing to adjusted EBITDA surpassing guidance at USD 58 million, with a margin of 31%.
• The company generated free cash flow of USD 56 million, driven by strong operational performance and higher interest rates. Interest income contributed USD 11 million, an increase of USD 10 million compared to the same quarter the previous year.
• CHGG closed the quarter with USD 1.2 billion in cash and investments. In addition, during the quarter, the company initiated an accelerated share repurchase agreement of USD 150 million, aiming to reduce outstanding shares by approximately 7%, a process expected to be completed in Q2.

Technical Observation (on the daily chart)

The stock price has experienced a significant decline of 53.58% over the past year, indicating a persistent downward trend. This downward trend is also evident in the medium-term, with a correction of 64.09% over last six months. However, there are signs of potential upside movement as the price is currently near an important support of USD 8.00-USD 8.50. The momentum indicator RSI (14 period) currently stands at 48.48, recovering from oversold levels and moving upside, further suggesting the expectation of an upward momentum in the stock price. It is worth noting that the price is currently trading below both the 21-day and 50-day SMA trend-following indicators, and these SMAs will act as short-term resistances, respectively.

As per the above-mentioned price action, correction in the stock, and technical indicators analysis, a ‘Speculative Buy’ rating has been given Chegg, Inc. (NYSE: CHGG), at the current price of USD 8.91, as of July 10, 2023, at 06:40 am PDT.

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. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is July 10, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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