There's been a notable change in appetite for Chegg, Inc. (NYSE:CHGG) shares in the week since its quarterly report, with the stock down 12% to US$76.17. The results don't look great, especially considering that statutory losses grew 46% toUS$0.29 per share. Revenues of US$154m did beat expectations by 7.0%, but it looks like a bit of a cold comfort. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the 13 analysts covering Chegg are now predicting revenues of US$777.7m in 2021. If met, this would reflect a sizeable 38% improvement in sales compared to the last 12 months. Chegg is also expected to turn profitable, with statutory earnings of US$0.55 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$758.8m and earnings per share (EPS) of US$0.46 in 2021. So it seems there's been a definite increase in optimism about Chegg's future following the latest results, with a solid gain to the earnings per share forecasts in particular.
Despite these upgrades,the analysts have not made any major changes to their price target of US$95.79, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Chegg analyst has a price target of US$105 per share, while the most pessimistic values it at US$79.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Chegg's past performance and to peers in the same industry. It's clear from the latest estimates that Chegg's rate of growth is expected to accelerate meaningfully, with the forecast 38% revenue growth noticeably faster than its historical growth of 14%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 23% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Chegg is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Chegg's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Chegg going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Chegg that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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