By Senad Karaahmetovic
Shares of Chegg (NYSE:CHGG) are trading nearly 20% higher in pre-open Wednesday after the education technology business reported better-than-expected earnings and raised its forecast.
Chegg reported Q3 EPS of $0.21 on revenue of $164.7 million to easily beat the consensus of $0.13 on revenue of $158.29 million. For this quarter, the company said it expected revenue between $200 million and $203 million, which should help it generate between $71 million and $74 million in adjusted Ebitda. Analysts were looking for $62.9 million in adjusted Ebitda on Q4 revenue of $205.1 million.
On a full-year basis, Chegg expected revenue to come in at $763.5 million (the midpoint), beating the $760.2 million consensus. The new guidance offers additional upside, given that Chegg previously guided to $757.5 million (the midpoint) in full-year revenue. The adjusted Ebitda is now expected in the range of $252-255 million, substantially higher than the previous outlook of $225 million to $235 million.
KeyBanc analysts said Chegg earned "extra credit" after beating estimates for adjusted Ebitda.
"The Company is clearly messaging a pivot to focus on profitability, which we believe will be well-received by investors, given visibility to recovery is still limited and top-line growth remains in transition," the analysts said in a client note.
Goldman Sachs analysts raised the price target to $24 per share from the prior $22.
"We see the company having a potential runway to grow its subscriber base as students look for more affordable and accessible academic support. While we came away from CHGG's results impressed on the execution side, we maintain our Neutral rating," the analysts wrote to clients.