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Why Chegg Stock Popped 16.4% in July

By Steve Symington – Aug 8, 2019 at 6:32PM

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The "student-first" connected learning platform company handily beat Q2 estimates and raised its guidance yet again.

What happened

Shares of Chegg (CHGG -0.77%) climbed 16.4% in July, according to data from S&P Global Market Intelligence, after the connected learning platform specialist announced strong second-quarter 2019 results. 

That said, Chegg stock also drifted higher in the weeks leading up to its quarterly update as investors anticipated the news. But when the report hit the wires after the markets closed on July 29, shares rallied almost 9% the next day alone.

Student studying in a brightly lit room near a window using a notebook computer.


So what

More specifically, Chegg's second-quarter revenue increased 26% year over year, to $93.9 million, translating to adjusted (non-GAAP) net income of $29.8 million, or $0.23 per share (up from $0.12 per share in the same year-ago period). Analysts, on average, were expecting adjusted earnings closer to $0.10 per share on revenue of $92 million.

Driving Chegg's top line was a 30% increase in revenue from its core services segment, to $80.3 million, driven by 30% growth in Chegg services subscribers to 2.2 million. Chegg study content views also climbed 25%, to 198 million.

Chegg CEO Dan Rosensweig called it a "great" quarter" adding, "The team remains focused on our mission of putting students first and our continued momentum and strong results gives us the confidence to, once again, raise our full year guidance."

Now what

To that end, Chegg now expects 2019 revenue of $398 million to $402 million (increased from its old target range of $393 million to $398 million), with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $121 million to $124 million (up $4 million from both ends of its old outlook).

In the end, there was nothing not to love about Chegg's latest beat-and-raise performance last month, and the stock simply responded in kind. If Chegg can sustain that momentum for the rest of the year, I think shareholders could be in store for even greater gains going forward.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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