Chegg stock price outlook: could CHGG surge 75% after earnings?

Chegg stock price has imploded as it became one of the biggest victims of the artificial intelligence craze. CHGG shares have crashed by over 80% this year and by almost 100% from its all-time high of $115. Its market cap has crashed from $115 in 2020 to $116 million today.

Chegg stock and AI

Chegg is a highly popular edtech company that helps millions of people learn in the United States. It leverages the experience and expertise of educators and new technologies like artificial intelligence to make learning easier.

Chegg offers its services through subscriptions, which is made up of Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu. 

The company, however, has become a big victim of the growing AI industry because of the advanced capabilities of models by firms like ChatGPT, Claude, and Gemini. As a result, its subscriptions dropped by 6% to about 8.1 million.

With ChatGPT and Claude, one can learn the most complex subjects like mathematics, software engineering, and even medicine.

The most recent financial results showed that the revenue dropped by 10% in the last quarter to over $163.1 million. 

Subscriptions revenue dropped by 11% to $146 million, while its gross profit margin fell to 72%. Most notably, the company showed that its business has moved from a high-profitable one to a loss-making one.

After making a profit of $266 million in 2022, its figure dropped to $6.6 million in 2023. It then moved to a net loss of over $626 million in the trailing twelve months. 

CHGG earnings ahead

The next key catalyst for the Chegg stock price will be its earnings scheduled on Tuesday. In its last financial results, the company’s revenue is expected to come in between $133 million and $135 million. 

Its subscription revenue is expected to be between $116 million and $118 million, while its gross margin will be between 67% and 68%. Analysts, on the other hand, expect that its revenue will be $134 million. For the year, analysts see the revenue falling by 11.7% to $632 million, followed by another 6.7% in 2025 to $589 million.

The company’s growth is expected to remain under pressure because of artificial intelligence’s momentum. As a result, the management has worked to turn around its business by using several approaches. 

Most importantly, it has worked to boost its artificial intelligence strategies, by leveraging its vast amount of data. It has also promoted its business to be at the intersection of AI and the real-world, because of its expert teachers.

At the same time, Chegg has worked to boost its efficiency by slashing about 23% of its global workforce. These measures are expected to save it between $40 million and $50 million in the next financial year. 

Chegg is also seeking to become a major player in the international market, which is largely untapped. 

Chegg share price analysis

Analysts believe that the CHGG stock price has more upside after it crashed hard in the past few years. The average stock estimate is $2.96, which is about 75% above the current level.

On the daily chart, we see that the Chegg share price has remained below the 100-day and 50-day moving averages.

At the same time, the Relative Strength Index (RSI) and the MACD indicators have pointed upward, forming a bullish divergence sign. 

Therefore, there is a likelihood that the stock will bounce back in the coming days as investors buy the dip. If this happens, the key point to watch will be about $3.

On the flip side, a drop below the year-to-date low of $1.50 will point to more downside and invalidate the bullish view.

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