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Chegg (CHGG) to Post Q4 Earnings: High Subscribers Hold Key

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Chegg, Inc. (CHGG - Free Report) is scheduled to report fourth-quarter 2020 results on Feb 8, after market close.

In the last reported quarter, its adjusted earnings and revenues topped the Zacks Consensus Estimate by 41.7% and 7%, respectively. On a year-over-year basis, earnings declined 5.6% but revenues increased 64%. The revenue growth was backed by a 72% improvement in Chegg Services revenues, which contributed 77% to total revenues.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 51 cents per share, suggesting growth of 45.7% from 35 cents in the prior-year reported figure. Notably, the consensus mark for fourth-quarter earnings has decreased to 51 cents from 52 cents over the past 30 days. The Zacks Consensus Estimate for revenues stands at $189.7 million, indicating growth of 51.1% from the year-ago quarter.

Chegg, Inc. Price and EPS Surprise

Chegg, Inc. Price and EPS Surprise

Chegg, Inc. price-eps-surprise | Chegg, Inc. Quote

Factors to Note

Chegg’s fourth-quarter results are expected to reflect increasing demand for online education amid coronavirus-induced unprecedented crisis. The pandemic impacted the overall economy including school industry. However, the same led to the creation of opportunities for online educational institutions like Chegg. The company expects total net revenues for the fourth quarter within $188-$190 million, indicating an increase from $126 million in the year-ago period.

Chegg’s fourth-quarter results are likely to reflect a sharp increase in subscribers, both in domestic and international markets. The Zacks Consensus Estimate for the to-be-reported quarter's subscribers is 5,456, which suggests year-over-year growth of 114.5%.

Moreover, robust Chegg Services and Required Materials revenues are likely to have aided the company’s performance in the quarter to be reported.

It expects Chegg Services revenues in the range of $162-$164 million. Meanwhile, the consensus mark for the same is pegged at $164 million, suggesting growth of 53.3% year over year.

Moreover, the consensus mark for Required Materials revenues is pegged at $26.1 million, suggesting growth of 43.4% year over year.

Meanwhile, from the margin perspective, the company expects gross margin within 72-73% for the quarter, suggesting a decline from 79% reported in the year-ago quarter.

Adjusted EBITDA is expected in the $82-$84 million range, implying growth from $47 million reported in the year-ago quarter.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Chegg this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Chegg has a Zacks Rank #3 and an Earnings ESP of -2.44%, at present.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Computer and Technology space that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat in the to-be-reported quarter:

Adobe Inc. (ADBE - Free Report) has a Zacks Rank #3 and an Earnings ESP of +0.39%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, Inc. (AMAT - Free Report) has a Zacks Rank #3 and an Earnings ESP of +2.54%.

Carrier Global Corporation (CARR - Free Report) has a Zacks Rank #2 and an Earnings ESP of +10.96%.

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