Chegg (CHGG) Raising PT After Solid Beat - BMO

BMO Capital analyst, Jeff Silber, reiterated his Outperform rating on shares of Chegg (NYSE: CHGG) after reporting a 2Q upside surprise. CHGG reported adjusted EBITDA of $7.2m, well above the consensus $5.9m as well as guidance of $5-7M. 2016 revenue guidance of $240-255m was narrowed from the prior $239-$257m range and included the prior consensus $248m estimate.

The "beat" was both revenue- and margin-driven. The company is making nice progress with its Chegg Services business (mostly Chegg Study) where annual growth accelerated, with management expecting this to continue in 2H16. While its Chegg Tutors business is still relatively small, management believes it will be its fastest-growing business over the next few years. In addition, in early July the company moved its ACT test prep product from beta to paid, with expectations of doing the same for SAT prep in the fall.

The price target increases to $7.00 from $6.00.

For an analyst ratings summary and ratings history on Chegg click here. For more ratings news on Chegg click here.

Shares of Chegg closed at $5.54 yesterday.

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