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Chegg Rises on Earnings Beat and Price-Target Upgrades

Chegg stock traded higher after the educational-tech provider's quarterly earnings and guidance prompted analysts to raise their price targets.

Chegg  (CHGG)  shares were higher on Tuesday after the company, which sells and rents textbooks, reported fourth-quarter earnings per share tripled, sparking a flurry of analyst upgrades.

The edtech company reported earnings of 18 cents a share, up from 6 cents in the year-earlier fourth quarter. Revenue reached $205.7 million, up 64% from $125.5 million.

"We expect continued strong growth in the U.S., and increased contribution internationally, where we expect to surpass one million subscribers in 2021," the company said.

The company also raised its guidance for this year. It expects revenue to rise 21% to 22% to between $780 million and $790 million. 

Chegg's total revenue in 2020 was $644.3 million.

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Lake Street analyst Eric Martinuzzi raised the firm's price target on Chegg to $98 from $85, given the "robust" fourth-quarter results and an upward revision to 2021 guidance. Martinuzzi raised his earnings estimates but affirmed a hold rating on the shares.

Barrington Research, which rates Chegg stock outperform, raised its price target to $120 from $110.

"Chegg's shares, which have more than tripled from a March 18 low of $27.71, are currently trading at 16.6 times and 13.8 times our 2021 and 2022 revenue estimates," the firm said, quoted by Seeking Alpha.

"We feel the premium valuation is justified, however, given its sustainable, superior revenue growth rate (vs. both peer groups) and high and rising profitability, combined with a balance sheet including $1.7 billion in cash to finance further growth initiatives including strategic acquisitions," Barrington said.

Chegg's price target was also raised by Piper Sandler (to $124 from $110), Northland Securities (target now $110) and Jefferies (target now $120), according to Seeking Alpha.

At last check Chegg shares were trading up 0.8% at $102.79. They have traded as high as $111.95 on Tuesday, up 9.8% from Monday's close.