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Why Shares of Chegg, Inc. Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chegg,  (NYSE: CHGG  ) were looking like a smart bet today, gaining as much as 12% on a strong first-quarter earnings report.

So what: The online textbook vendor said revenue increased 22%, to $74.4 million, ahead of estimates at 70.9 million, while its adjusted per-share loss improved to -$0.22, better than the consensus at -$0.30. Digital revenue growth was perhaps Chegg's brightest spot in the quarter, growing 66%, to $17.8 million as Chegg looks to branch away from its core book-selling segment into career services and other platforms.   

Now what: Guidance for the student-focused website was in line with estimates, as it sees full-year revenue of $310-$320 million against the consensus at $314.7 million. For the full year, the company expects negative EBITDA, meaning it still has a ways to go before turning in a profit on the bottom line. Still, metrics are moving in the right direction, and higher-margin digital revenues will be key to driving the company's future success. Keep an eye on growth in that category going forward. If it continues to propel overall sales growth, I'd expect the stock to move higher. 

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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Related Tickers

8/28/2015 4:02 PM
CHGG $7.66 Up +0.11 +1.46%
CHEGG, INC CAPS Rating: ****