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Chegg AI Investments Not Translating To Improved Fundamentals, Analysts Dive Deeper Into Q4 Print

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Shares of Chegg Inc (NYSE: CHGG) slipped in early trading on Tuesday, after declining more than 8% in the premarket session.

The company reported its fourth-quarter results amid an exciting earnings season. Here are some key analyst takeaways from the release.

Piper Sandler analyst Arvind Ramnani downgraded the rating from Neutral to Underweight, while reducing the price target from $9.00 to $8.50.
KeyBanc Capital Markets analyst Jason Celino maintained a Sector Weight rating on the stock.
William Blair analyst Stephen Sheldon reiterated a Market Perform rating.
Needham analyst Ryan MacDonald reiterated a Hold rating on the stock.

Check out other analyst stock ratings.

Piper Sandler: Chegg reported only a modest upside despite “muted” expectations for the fourth quarter, “wrapping up a year with sustained revenue headwinds,” Ramnani said in the downgrade note.

“Subscription Services revenues declined 4.7% in FY23, with domestic/US subscribers constituting ~74% and international ~26%,” the analyst wrote. He added, however, that the company’s disciplined spend management was impressive, as it offset some of its revenue pressure on margins.

KeyBanc: Chegg reported a “modest” revenue beat, mainly due to better Subscription Services revenues, Celino said. “The slightly higher revenue, along with expense management, drove EBITDA to $66.2M (35.2% margin), ahead of consensus of $63.1M (33.9% margin),” the analyst wrote.

He further stated that the company issued disappointing first-quarter guidance “as new subscriber growth, particularly in the U.S., remains challenged.”

William Blair: Chegg’s fourth-quarter results were “slightly ahead of our estimates, although subscriber trends remained weak,” Sheldon said in a note. The company’s first-quarter guidance was disappointing on both the top and bottom line, he added.

Although overall subscriber trends remained weak, with unique subscribers declining 9% year-over-year, the company’s international subscriber count grew for the first time in two years, the analyst stated.

Needham: Chegg continues to focus on AI, after its successful rolled out of automated answers to learners in the first quarter, which resulted in a “material Y/Y increase in the amount of Q&A on the platform at a roughly 75% lower cost,”…

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