Is Chegg a good investment for long-term investors?
Many have used it before the pandemic, and many will use it after the pandemic.
*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor a registered financial expert. Please see a financial advisor before making investment decisions.
In this blog post, I’m not going to be telling you on whether you should use Chegg to help cheat your way through your courses or not. Rather, I’ll be talking about the stock and whether the business is a great investment for the long run or not.
Since topping in mid-Feburary, Chegg shares are down 32.77%. Chegg shares dropped as part of the broader growth-stock sell-off as investors sell their overvalued growth stocks in favor of beaten-down reopening stocks.
Here are reasons why it might be worth buying the dip on Chegg:
Online learning is here to stay
Many of us have gained an immense distaste of schooling during our time at “Zoom University.” In the process, we’ve experienced some of the benefits of online learning like not having to commute to school and having more flexibility on when we choose to learn (if we have pre-recorded lectures). Schools got to see lower operating costs. Teachers got to see cost savings from teaching online versus in-person.
Also, because Chegg’s services were still useful to students even before pandemic times, Chegg won’t see a massive drop in subscriptions once schools reopen. Rather, this pandemic has shown the wide array of uses that Chegg provides to students and since students have found it useful during the pandemic, many won’t immediately cancel their subscriptions because in-person classes are now available. Instead, like most of Chegg’s subscribers during pre-pandemic times, they’ll only cancel their subscriptions once they finish school.
Even if in-person classes are coming back, Chegg is still a useful platform for students
Whether it’s pandemic times or not, Chegg holds the largest crowdsourced database for answers on homework questions, they have textbook rentals for both online textbooks and physical textbooks.
Students will note that when they look up answers to questions they’re struggling with online, usually Chegg pops up first in Google. With great SEO, Chegg continues to garner traffic to its sites whether these students are taking calculus, biology, etc.
If students found Chegg to be useful even before the pandemic, then students will still choose to do business with Chegg even as the pandemic goes away.
And remember, what separates Chegg from the rest of the competition is its treasure trove of content. No other platform would be able to outcompete Chegg because Chegg has way more content than its competitors. You can buy subscriptions to access the database of homework answers from other places but the amount and diversity of questions that those platforms have will look tiny compared to what Chegg offers. Plus, since other platforms price their subscriptions similarly to Chegg, Chegg offers much more value to its customers than its competitors.
With all that, Chegg is a high-moat education platform that investors shouldn’t underestimate. Its content pool is what gives it a moat that many would dream of having. While investors are lowering their expectations on the company because the pandemic is going away and in-person classes are making a comeback, because many students have found value in Chegg even before pre-pandemic times, it’s very likely that they’ll still find value in their Chegg subscriptions even when they take in-person courses.
In the meantime, both parents and traders should start loving online learning all at the same time as students continue to use it in their educational pursuits in a post-pandemic world.
The pandemic has opened my eyes and has given me experiences that have shown how current trends are making the world a worse place.
I don't see bureaucrats as a solution to problems. I see the common people, demanding change, to solve it.