Chegg Raised to Buy at Needham on Upside Potential to Conservative Estimates

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Chegg (NYSE:CHGG) shares are trading about 3% higher at the start of today’s trading session after a Needham & Company analyst upgraded to Buy from Hold with a $28 per share price target.

Drivers behind the upgrade call include the analysis of the company’s Q3 and FY22 guidance assumptions, as well as forecasts for Fall 2022 enrollment expectations.

“Our analysis gives us confidence that enrollments decline by only approx. 140k from Spring ’22, creating the potential for upside in 3Q given Chegg’s guidance that assumes that subs decline by ~500k. While it is possible for Chegg subs to decline by greater than enrollments, we believe continued int’l expansion and domestic stabilization, supported by stable usage in our student survey and a strong return of int’l enrollments, take the bear case off of the table,” the analyst explained in a client note.

Taking both into account, the analyst sees the company as well-positioned to report upside to conservative expectations.

Chegg shares are still down over 35% YTD.