CHGG – Market expectations are for Uniform ROA to reach new peaks, but management may be concerned about growth, Thinkful, and online education effectiveness

February 10, 2021

  • Chegg, Inc. (CHGG:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with an 81.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about ARPU growth, the long-term potential of Thinkful, and effectiveness of online education
  • Specifically, management may lack confidence in their ability to sustain average revenue per unit (ARPU) growth and meet their 2020 revenue guidance. Moreover, they may be exaggerating the effectiveness of online education and the long-term profitability potential of Thinkful. Furthermore, they may lack confidence in their ability to sustain Thinkful subscriber growth, sustain their high growth model, and drive international market growth. Finally, management may be exaggerating the diversity of their customer base, the quality of their direct-to-student relationships, and their leadership position in the online education market