Chegg has been treading water for the past six months, recording a small return of 0.5% while holding steady at $0.96, and the stock fell short of the S&P 500's 9% gain during that period. Analysts highlight three reasons for caution: services subscribers have declined by 23.3% annually over the last two years, EBITDA margin decreased by 12.9 percentage points to 20.3% over the trailing 12 months, and earnings per share dropped by 54.2% annually over the last three years. With shares trading at 3.4 times forward EV/EBITDA, the valuation appears optically cheap but the potential downside is significant given shaky fundamentals. The analysts recommend looking at other opportunities, including what they describe as the most entrenched endpoint security platform on the market.
Chegg IncSubscriber losses, shrinking EBITDA margin, and falling EPS indicate deteriorating financial performance.