Yahoo Finance Chegg (CHGG) to Boost Growth With New Restructuring Plan
Chegg, Inc. CHGG has unveiled its new restructuring plan along with publishing a Shareholder Letter, which outlines a comprehensive strategy highlighting the main target customers – students – and 360 degrees of global individualized support.
The company has undertaken this strategic move to address the unmet educational needs with an offering that is differentiated, holistic and verticalized.
Restructuring Strategy in Details
Chegg is focusing on shifting the importance toward students seeking positive learning outcomes and holistic support through a comprehensive course load; investing more resources in its international program, especially six target countries; diversifying distribution channels, including direct-to-educational institutions, and executing a new brand and marketing strategy, which includes reaching students in high school and college.
The company wishes to reduce its global headcount by 23%, primarily to emerge as a more efficient organization, increase the speed of innovation and align its expense base with near-term revenue trends. Chegg also aims to simplify systems and processes, using partners to leverage best-in-class software for applications that are not core to its business.
In accordance with its plan to reduce its global headcount, the company is also focused on trimming 441 employees by 2024, which represents 23% of its global workforce, including the United States, Israel and India. This move is accompanied by the closure of two offices outside the United States, and other cost rationalizations.
The primary aim of Chegg, with the undertaking of the new strategies and restructuring initiatives, is to become an organization that offers holistic and differentiated product offerings for students through one affordable platform designed to address gaps in the student experience. With the availability of artificial intelligence verticalized for education, a proprietary learning model, more than 100 million pieces of content, subject matter experts reinforcing quality and functional 360-degree support services, Chegg is more than ready to offer experiences beyond traditional online educational support.
Regarding its growth prospects, Chegg expects the aforementioned strategies to result in non-GAAP expense savings between $40 million and $50 million for 2025. For the year, the company holds onto its aim of achieving an adjusted EBITDA margin of more than 30% and a free cash flow of at least $100 million.
Price Performance
Shares of this student-first online learning platform plunged 77% in the year-to-date period against the Zacks Internet - Software industry’s 13.3% growth. The company’s prospects are hindered given the soft contributions from the Subscription Services product line due to a decline in subscribers who have paid to access the services. That said, the new restructuring plan, efficient execution of strategic initiatives and focus on operational excellence are likely to foster growth in the upcoming years.
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Let’s take a look at the estimate revision trend to get a clear picture of what analysts are thinking about the company. In the past 60 days, the Zacks Consensus Estimate for 2024 earnings has declined to 99 cents per share from $1.10. The estimated figure indicates a 10% decline from the year-ago period’s reported levels. Nonetheless, Chegg has a trailing four-quarter earnings surprise of 4.3%, on average.
A VGM Score of A, backed by a Value Score of A and Growth Score of B, bodes well for the company. Such an uptrend depicts analysts’ optimism about the stock’s potential.
Zacks Rank & Key Picks
Chegg currently carries a Zacks Rank #3 (Hold).
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The consensus estimate for WWD’s fiscal 2024 sales and EPS indicates growth of 13.3% and 39.7%, respectively, from the previous year’s reported levels.
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