Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Oct 15, 2019
Online education company Chegg found support at its 104-week moving average

Online education company Chegg found support at its 104-week moving average

Chegg Inc. (NYSE: CHGG) is an online education company that operates a learning platform designed to help students pass tests, classes, and save money on required materials. Chegg Services offers students required materials such as print textbooks as well as eTextbooks. The company also offers Chegg Study which helps students master difficult concepts, Chegg Writing to help students format and cite sources in written work, and Chegg Tutors which allows students to reach out for human help. The company is headquartered in Santa Clara, California and was founded in 2003.

The company has performed very well in the last few years with earnings growing by 122% per year over the last three years and they were up 92% in the second quarter. The company is scheduled to release third quarter earnings on October 29.

Looking at the Tickeron Fundamental Analysis Overview, Chegg has an SMR rating for of 31. This indicates very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. Chegg has an ROE of 17.2% and a profit margin of 21.9%. Sales have grown by 12% per year over the last three years and they jumped by 26% in the second quarter.

Looking at the weekly chart we see that the stock has fallen over the last three months, but that drop could be creating a buying opportunity. The 104-week moving average (two years of data) appears to have acted as support in the last few weeks and the overbought/oversold indicators dropped in to oversold territory. The indicators have turned higher in the last few weeks and that could be a bullish sign for the stock.

The Tickeron Technical Analysis Overview shows that the stock dropped below the lower Bollinger Band back on October 2. As a result, a price increase is expected as the ticker heads toward the middle band. In 21 of 28 cases where Chegg's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued uptrend are 75%.

The overview also points out that the Moving Average Convergence Divergence (MACD) just turned positive. Considering data from situations where Chegg's MACD histogram became positive, in 36 of 50 cases, the price rose further within the following month. The odds of a continued uptrend are 72%.

Turning our attention to the sentiment indicators for Chegg, there are 13 analysts covering the stock right now with 10 “buy” ratings and three “hold” ratings. This puts the buy percentage at 76.9% which is slightly higher than average and suggests slightly more optimism toward the stock.

The short-interest ratio is a whopping 10.8 currently and the number of shares sold short is at 19.89 million shares. The ratio is actually down from 12.2 at the beginning of September.

Chegg has beaten its earnings estimates in each of the last eight quarters. If the company should beat estimates again this time around, the high short interest ratio could add fuel to a rally as short-sellers scramble to cover their positions. This would add buying pressure to the stock.

Related Tickers: CHGG
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