Chegg Chugs Along as “Direct-to-Student” Model Thrives Through Pandemic

Chegg is on a 4-year earnings winning streak. The on-demand digital learning platform has beat and raised guidance for the 16th straight quarter as students flock to the service while studying from home.

Shift to digital learning: The surge in demand for online learning led to 64% y/y revenue growth for Chegg, the best growth rate in the company’s history, according to Jefferies analyst Brent Thill. The company benefited from a 69% jump in subscriber growth to 3.7 million students. Thill raised his price target for Chegg to $105 in response to the quarterly results, citing confidence in Chegg’s ability to capture multiple years of healthy double digit revenue growth.

• Chegg Study: The company’s homework help learning service remains the key driver for subscriptions and engagement. The service, which has a library of 46 million pieces of content, saw content views in the quarter increase 82% y/y to 252 million. 

International growth: Chegg now offers services to students in over 190 countries, widening its total addressable market to over 100 million, according to Thill. The company noted that one out of four new questions asked on the platform were from students outside the U.S. 

Sharing is not caring: Chegg also benefited from a crackdown on password sharing. In mid-August, Chegg implemented new device management technology aimed at minimizing account sharing.

So why are shares falling? Some investors are feeling bearish on valuation and slowing growth. The stock is up more than double since the start of the year and the company is nearing a valuation of $11 billion. Chegg’s 2021 guidance implies a steep slowdown, but Thill points out that the expected growth rate remains in line with pre-COVID levels.