In recent years, Chegg Inc. (CHGG) has evolved significantly from being a textbook rental company for college students to being a full provider of services that help students succeed, asserts Hilary Kramer, growth stock expert and editor of GameChangers.
The company offers subscriptions collectively called Chegg Services. Chegg Study provides expert answers and textbook solutions, and Chegg Writing helps students create citations for their papers.
Chegg Tutors gives quick access to inexpensive online tutors on a wide range of subjects. Chegg Math Solver, which offers step-by-step problem solving for Algebra, Calculus and Linear Algebra.
Chegg expanded its service offerings through last year’s $90 million acquisition of Thinkful, which offers professional courses in software engineering, data science and analytics and product design.
In June, the company expanded its math offerings by acquiring Mathaway for $100 million. Mathaway covers over 400 subjects in 100 countries and 13 different languages.
The company’s traditional textbook rental business, along with textbook and eBook purchases, is its Required Materials division. While not growing as fast as services, this division should realize low-to-mid-single-digit revenue growth in the future.
The company has achieved significant growth due to the popularity of its services, with total subscribers increasing from one million at the end of 2015 to 3.9 million currently.
CHGG has a lot more room to grow. It has 3.9 million subscribers, compared to a market base of 36 million college and high school students in the United States, and 18 million students in Canada and Australia.
Therefore, it has only penetrated its total available market by 4%. The company believes it can increase this base by another 48 million in other countries. The recent Mathaway acquisition is a step in achieving this goal.
With a strong franchise and name recognition among students, affordable services that aim to help students succeed and a strong growth record with still under-penetrated markets, Chegg has a good deal of growth ahead of it. My target is $90.
