Back to top

Image: Bigstock

Chegg (CHGG) Betters Estimates in Q3 Earnings, Lifts View

Read MoreHide Full Article

Chegg, Inc. (CHGG - Free Report) reported third-quarter 2017 adjusted earnings of a penny, compared to the Zacks Consensus Estimate of break-even earnings.

Meanwhile, net revenues of $62.6 million beat the Zacks Consensus Estimate of $57.6 million by 8.7%. However, revenues declined 12% year over year.

Chegg, Inc. Price, Consensus and EPS Surprise

 

Chegg, Inc. Price, Consensus and EPS Surprise | Chegg, Inc. Quote

 

Inside the Headline Numbers

Chegg Service revenues of $39.5 million increased 33% year over year and was slightly above the projected range of $37 million to $39 million. Chegg Service subscriber base totaled 1.2 million in the quarter, hitting a record of 37% growth year over year. Sequentially subscriber base remained flat.

Gross profit of $40.3 million in the quarter increased 23.4% from the year-ago level. Gross margin of 64.3% was higher than the company’s expectations, courtesy of incremental revenues from Chegg Services.

Adjusted EBITDA of $5.7 million shows substantial improvement from the year-ago level of $0.2 million. The figure is also above the company’s earlier expectations of $3-$4 million.

Chegg had cash and cash equivalents of $122.2 million for the period ending Sep 30, 2017, compared with $77.3 million as of Dec 31, 2016.

Q4 Guidance

Total net revenue in the fourth quarter is expected in the range of $70 million to $71 million, while Chegg Services Revenues are estimated in the $58 million to $59 million band.

Gross margin is anticipated between 69% and 71%, while adjusted EBITDA is expected at around $19 million to $20 million.

2017 Guidance Lifted

Total net revenue is now projected in the range of $251 million to $252 million, higher than $241 million to $243 million expected earlier. Chegg Service revenues are estimated in the $183 million to $184 million band, higher than $180-$182 million anticipated earlier.

Gross margin is expected to be higher than 65%, while adjusted EBITDA is likely to come in between $44 million and $45 million, higher than $41-$42 million expected earlier.

Capital expenditures are estimated to be $27 million. Free cash flow is projected at around $18 million.

2018 Guidance

Total revenues are expected at $295 million, with Chegg Service revenues amounting to $240 million. Gross margin for 2018 is expected to be higher than 70% while the company expects an adjusted EBITDA of $74 million.

Zacks Rank and Stocks to Consider

Chegg has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same industry are Atlassian Corporation Plc (TEAM - Free Report) , HubSpot, Inc. (HUBS - Free Report) and Twitter, Inc. . While Twitter sports a Zacks Rank #1 (Strong Buy), Atlassian and HubSpot carry a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

Twitter surpassed earnings estimates in all of the past four quarters, the average beat being 152.50%.

HubSpot also surpassed earnings estimates in each of the trailing four quarters, the average beat being 171.01%.

Atlassian beat earnings in the trailing four quarters, the average being 22.92%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Chegg, Inc. (CHGG) - $25 value - yours FREE >>

HubSpot, Inc. (HUBS) - $25 value - yours FREE >>

Atlassian Corporation PLC (TEAM) - $25 value - yours FREE >>

Published in