Chegg Inc Stock Forecast 2019: An Overlooked Tech Stock Posting Huge Gains

Chegg Inc Stock Forecast 2019: An Overlooked Tech Stock Posting Huge Gains
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CHGG Stock Forecast 2019

Chegg Inc (NYSE:CHGG) is, truth be told, one of those boring technology companies that get overlooked by investors searching for a tech stock with a sizzle. What the company lacks in excitement, it makes up for in gains. The digital education company’s share price advanced 119% in 2017 and 73.8% in 2018.

To put that into perspective, the New York Stock Exchange (NYSE) was up 15% in 2017 and lost a staggering 11.5% of its value in 2018. Throughout 2018, Chegg reported double-digit revenue growth in the first, second, and third quarters, and increased its full-year 2018 guidance.

The company has strong fundamentals, a great outlook for 2019, and excellent momentum. For these reasons, a 2019 stock forecast for Chegg Inc of $48.00 is in reach. That forecast represents an approximately 50% gain over the company’s current stock price of roughly $32.45.

Chegg Inc

Unless you’re a technical trader, it’s always good to know what you’re investing in—especially in this environment.

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Volatility is up, stocks are down, the global economy is cooling, the Fed’s monetary policy is under scrutiny, there’s political gridlock in Washington, and there’s an ongoing trade war between the U.S. and China—the two largest economies in the world.

You don’t have to worry about trade wars when it comes to Chegg Inc.

It’s an American education technology company that helps American students in high school and college learn more in less time and, most importantly, at a lower cost. It specializes in online textbook rentals, homework help, online tutoring, test prepping, scholarships, and internship matching.

While Chegg is not entirely recession-proof, it is scalable with the growing adoption of digital technology. There are always students looking for help. This is evident when you consider the company’s soaring subscription numbers.

Chegg has a market cap of $3.7 billion, a forward price/earnings (P/E) ratio of 51.7, total cash of $475.0 million, and total debt of around $280.0 million.

Chegg Inc Stock Financials

On October 29, 2018, Chegg announced another quarter of strong results. Revenue for the third quarter increased 19% year-over-year to $74.2 million, with both “Required Materials” and “Chegg Services” revenues exceeding expectations. (Source: “Chegg Reports Q3 2018 Financial Results,” Chegg Inc, October 29, 2018.)

The number of Chegg Services subscribers increased 45% year-over-year to 1.7 million. The total number of “Chegg Study” content views soared 51% year-over-year to 110 million.

Chegg reported a third-quarter net loss of $13.7 million, or $0.12 per share. During the third quarter of 2017, the company posted a net loss of $11.5 million, or $0.11 per share.

Non-generally accepted accounting principles (GAAP) net income was $8.7 million, versus $1.5 million in the same prior-year period.

Chegg ended the quarter with approximately $475.0 million of cash and investments.

“We had a great Q3, driven by 37% Chegg Services revenues growth and 45% subscriber growth, year-over-year,” said Dan Rosensweig, Co-Chairman and CEO.

“As we come out of another back to school season, the success we experienced gives us confidence to, once again, raise our guidance for the year, as well as provide a strong initial outlook for 2019.” (Source: Ibid.)

To that end, in the fourth quarter, Chegg now expects total revenue to be in a range of $90.0–$92.5 million. At the low end of guidance, that represents a 22.4% increase over the $73.5 million reported in the fourth quarter of 2017.

The company also upped its full-year revenue guidance to a range between $315.0 million and $318.0 million. At the low end, that represents a 23.4% increase over the $255.1 million reported in 2017.

Turning to 2019, Chegg’s early forecast for total annual revenue is approximately $388.0 million.

Chegg Inc Stock Analysis for 2018

Chegg stock had a great year in 2018, entering at $16.35 and closing out the year at $28.42. While the stock price took a hit in October, along with the rest of the stock market, it has since rebounded.

Chegg shares performed well because it continued to report healthy quarterly results.

Chart courtesy of StockCharts.com

Chegg has gotten off to a good start in 2019. By January 9, the share price was already up 15%.

For technical traders, this might not be a surprise. Although correlation is not causation, Chegg’s share price recently hit an important technical indicator. The company’s 50-day moving average crossed over the 200-day moving average on January 7. This represents a bullish indicator called a golden crossover.

Time will tell whether the stock will continue its bullish move or take a breather on the heels of short-term profit-taking.

Why CHGG Stock Could Reach $48.00 in 2019

Chegg Inc has announced a robust outlook for 2019. At its current price, the stock is already 8.2% above the median consensus forecast of $30.00 per share for 2019. It is also just five percent off the high estimates for the year.

While Chegg’s share price can obviously tumble from its current levels, it has everything going for it—at least right now. If the company’s projections come to fruition, investors should expect to see Chegg’s share price climb significantly over the next 12 months.

If Chegg’s share price performs as expected and reach $48.00 per share in 2019, it would represent a roughly 50% gain over its current share price.

Analyst Take

Chegg stock has performed exceptionally well over the last two years. And 2019 looks like it will be an even better year for the education tech company. It has announced an aggressive revenue target for 2019.

Some economists are predicting that the U.S. could slip into a recession in 2019. If so, it will likely be mild and short. And while Chegg is not exactly recession-proof, it is certainly recession-resistant. Who doesn’t want better grades?

Moreover, the company’s efforts are focused on the United States. This means it will not be hurt by the trade war with China. Nor will it be hit by an economic slowdown in Europe—the world’s largest trading region—or Canada, our affable neighbors to the north.