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Why Chegg (CHGG) Could Be Positioned for a Slump
March 12, 2014

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Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Chegg, Inc. (CHGG - Free Report) , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in CHGG.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 3 estimates moving down in the past 30 days, compared to no upward revision. This trend has caused the consensus estimate of loss to widen, going from a loss of 26 cents a share a month ago to its current level at a loss of 55 cents.

Also, for the current quarter, Chegg has seen 3 downward estimate revisions versus no revision in the opposite direction, dragging the consensus estimate of loss to 35 cents a share from a loss of 28 cents over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 11.8% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Internet Software industry, you may instead consider some better-ranked stocks including China Mobile Games and Entertainment Group Limited , Model N, Inc. (MODN - Free Report) and j2 Global, Inc. (JCOM - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy) and may be better selections at this time.

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