Consumer Staples Select Sector

Russell 2000

The Diluter

Comparable Companies - CHGG

The report contains 1 discretionary insider sale totaling $39,553.82. The latest short interest data shows 6,054,689 shares short, representing 6.1% of float with 4.85 days to cover. Institutional ownership data includes filings from The Vanguard Group and BlackRock, Inc.

DIRECTOR

The filing states the securities were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer.

Transitioned from CEO to Executive Chairman role.

Executive Chairman

Appointed as President and CEO, previously COO.

President and Chief Executive Officer

Chief Financial Officer, Principal Financial & Accounting Officer and Treasurer

Co-Chairperson of the Board

Director

Daniel Rosensweig

Nathan Schultz

David Longo

Richard Sarnoff

Marcela Martin

Ted Schlein

Daniel Rosensweig's career demonstrates a consistent ability to lead and transform technology and media companies. His long tenure at Chegg, where he transitioned the business model and oversaw significant growth, highlights his strategic vision and operational leadership. While specific financial outcomes at earlier roles are less detailed in public records, his consistent progression to top leadership positions suggests a proven track record of driving business objectives and adapting to market changes.

Transition from CEO to Executive Chairman

Nathan Schultz's career progression within Chegg, from various content and operational roles to COO and now CEO, indicates a deep internal understanding of the company's business and strategy. His leadership in operational roles and focus on digital transformation and AI suggest a forward-looking approach. As CEO, his challenge will be to leverage this experience to drive future growth and navigate the evolving educational technology landscape, building upon the foundation laid by his predecessor.

David Longo's financial career at prominent technology firms like Intuit and Apple provides a strong foundation for his role as CFO at Chegg. His experience in financial management within rapidly evolving tech environments suggests an ability to handle complex financial operations and strategic planning. His tenure at Chegg will be critical in guiding the company's financial health and capital allocation strategies amidst market shifts.

Richard Sarnoff's extensive experience in private equity and senior executive roles within the media and digital sectors provides a valuable perspective to Chegg's board. His background at KKR and Bertelsmann suggests a deep understanding of financial strategy, corporate governance, and market dynamics. As Co-Chairperson, he is positioned to contribute to the company's strategic direction and oversight, leveraging his experience in capital allocation and business transformation.

Appointment as Co-Chairperson of the Board

Marcela Martin's extensive experience as a CFO for major media and technology companies, including her current role at Contentsquare, provides a strong financial and strategic perspective to Chegg's board. Her background in global finance leadership, particularly at National Geographic Partners and Fox International Channels, suggests a robust understanding of financial operations, risk management, and strategic growth initiatives. As a director, she contributes valuable financial acumen to the company's governance and oversight.

Ted Schlein's long-standing role as a General Partner at Kleiner Perkins provides him with extensive experience in identifying, funding, and nurturing technology companies. His expertise in venture capital, particularly in cybersecurity and enterprise software, offers valuable insights into innovation and market trends. As a director at Chegg, he contributes a critical perspective on technology strategy and growth potential, leveraging his deep understanding of the tech landscape.

Marne Levine

Renee Budig

Melanie Whelan

John (Jed) York

Technology company providing an educational platform delivering proprietary and third-party curriculum, software systems, and educational services for K-12 and career learning.

K-12 online education, including virtual and blended public schools.

Post-secondary education and skills-based training for in-demand careers.

Provider of postsecondary education and workforce solutions, focusing on healthcare and other in-demand professions through accredited institutions.

Nursing, medicine, and allied health programs through institutions like Chamberlain and Walden.

Business, technology, and other professional programs.

Leader in China's adult online education and personal interest learning market, offering online professional courses, educational content, and degree-oriented post-secondary courses.

Online degree and diploma programs for adult learners.

Professional certification exam preparation, skill enhancement, and personal interest courses.

Provider of K-12 after-school tutoring services in China, offering online and offline educational content and learning devices.

Offline and online enrichment programs for K-12 students.

Learning devices, books, and other educational content.

The company is headquartered in Santa Clara, California. Management is aggressively reducing its physical footprint, closing offices in the US and Canada.

Chegg is a Turnaround Candidate facing a terminal structural decline in its legacy academic business due to generative AI. The current management team, led by CEO Nathan Schultz and Executive Chairman Daniel Rosensweig, is executing a crisis-response plan. Capital allocation is exceptional (Score 4), characterized by a complete halt to buybacks and a singular focus on debt reduction, improving Net Leverage from 482.1M to 39.7M. Incentive alignment is strong (Score 3), with compensation tied to survival metrics like FCF and debt reduction, though the lack of insider buying is a concern. The board is robust (Score 3), featuring qualified financial experts and a refreshed structure. However, the external track record (Score 2) is the weakest pillar; while Schultz has deep internal experience, neither he nor Rosensweig has a verifiable public track record of saving a company from a crisis of this magnitude, as the current distress occurred under their watch. The team is structurally sound for a turnaround, but the lack of a proven crisis-saving CEO is a significant execution risk.

The company disclosed a reduction in headcount of approximately 400 employees in Q3 2025 as part of a strategic restructuring. The CEO pay ratio is 83:1. Total full-time employees are 1,241.

The company disclosed a $55 million estimated contingent liability related to the Leventhal class action lawsuit and a $7.5 million FTC settlement in Q3 2025.

The company is in a severe structural decline, with Q3 2025 revenue collapsing 42% year-over-year to $78 million and operating margins negative at -24.5% TTM, driven by a 50% drop in Google traffic due to AI disruption.

Management's strategy is to aggressively reduce CapEx, targeting a 50% reduction in 2026. The stated purpose of CapEx is 'Cost Reduction/Efficiency' via AI integration, not growth expansion. R&D is focused on developing 26 verticalized LLMs and integrating AI into the product stack to reduce content costs.

The asset base is being aggressively written down. Management disclosed a $481.5M non-cash impairment charge in Q2 2024 and a $141.6M valuation allowance on deferred tax assets. The auditor identified asset impairment as a Critical Audit Matter (CAM). The company is closing physical offices in the US and Canada, further reducing tangible assets.

The negative ROIC is driven by the collapse in operating income and the massive impairment charges. The 'reinvestment' in the form of R&D ($170.4M in FY 2024) and CapEx is not generating returns because the underlying revenue base is shrinking. The pivot to skilling requires upfront investment but has not yet generated material returns.

P/Tangible Book Value

EV/EBITDA

Daniel Lee Rosensweig

Former CEO of Chegg, Yahoo!, and ZDNet. Extensive experience in transforming and scaling technology and media companies.

President and CEO. Previously COO and President of Learning Services at Chegg. Focus on digital transformation and AI integration in education.

Co-Chairperson. Former Chair of KKR Americas Private Equity. Experience in media, publishing, and private equity.

General Partner at Kleiner Perkins. Focus on working with and investing in technology companies.

CFO of Contentsquare. Former CFO roles at National Geographic Partners and Fox International Channels. Extensive global finance leadership.

Former COO of Instagram. Experience in technology, social media, and business development.

Former EVP and CFO of Paramount Streaming. Extensive financial leadership in media and technology companies.

Former CEO of SoulCycle. Consumer technology and marketing experience.

CEO of San Francisco 49ers. Sports and media experience.

Nathan Schultz (via Schultz Family Trust)

Executive Officers: CEO 3x annual cash salary; Other Executive Officers 1x annual cash salary. Directors: 3x base annual cash retainer ($40,000).

Chegg, Inc. is a student-first connected learning platform. The company is in the process of a strategic restructuring, splitting its operations into two distinct units: Chegg Skilling (a growth unit focused on language learning and workplace readiness) and legacy academic services (a cash generation unit focused on digital educational content). The company's core assets include a proprietary library of millions of human-verified Q&A pairs and 26 verticalized large language models (LLMs) designed for education. The company is aggressively reducing its physical footprint, closing offices in the US and Canada, and rationalizing assets to preserve cash.

Growth unit focused on language learning (Busuu) and workplace readiness (Chegg Skills). Targets the B2B market for corporate reskilling.

Cash generation unit focused on digital educational content, including Chegg Study and Chegg Study Pack. Being wound down.

Held WACC at 13.0% and Terminal Multiple at 4.0x EV/EBITDA, solved for EBITDA margin required to justify current market cap.

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - CHGG

The EdTech industry is experiencing a bifurcated capital cycle. While peers like Stride and Adtalem are expanding with 12-17% revenue growth, Chegg is in a 'Bust' phase, destroying supply to survive. The secular shift toward AI-driven personalized learning is a tailwind for the sector but a structural headwind for Chegg's legacy content-library model.

Chegg is at a critical juncture as it navigates a 42% revenue collapse and a landmark antitrust lawsuit against Google, with its stock price currently testing the $1.00 NYSE compliance floor.

Sequential growth in Skilling revenue exceeding $20 million. This would provide the first concrete evidence that the B2B pivot is gaining sufficient traction to eventually offset legacy decay.

Outcome of the Strategic Review Process. A potential sale or go-private transaction would provide an immediate valuation floor and resolve the current equity discount.

Existential Liquidity Risk. The primary risk is a 'race against time' where the legacy revenue collapse outpaces the skilling pivot, leading to negative free cash flow that depletes the $112 million cash reserve.

The current asset base for Property, Plant & Equipment (PP&E) primarily consists of general office equipment, computer hardware, and leasehold improvements. Chegg, Inc. operates predominantly as a digital learning platform, and recent strategic restructuring has involved a significant reduction in its physical footprint, including the closure of physical offices in the US and Canada. This indicates a contraction in the tangible asset base, with remaining assets likely being general-purpose and subject to rapid depreciation. The Net PP&E reported as of September 30, 2025, was $143.7 million.

Direct transaction comparables for the orderly liquidation of general office equipment and IT assets from a distressed online education company are not readily available in public records. The valuation relies on general industry recovery rates for similar asset classes in liquidation scenarios.

Cash & Equivalents

Accounts Receivable

Chegg's inventory valuation analysis unequivocally concludes an Orderly Liquidation Value of $0.0 million across all scenarios. This is directly supported by the company's balance sheet, which explicitly reports zero inventory. Furthermore, the company's strategic narrative confirms its exit from the physical textbook business, with all related fulfillment activities being outsourced to a third-party partner since mid-2022. Consequently, there are no physical goods to liquidate, rendering traditional inventory recovery rate assessments irrelevant. The absence of inventory also means that inventory turnover and health assessments are not applicable to Chegg's current operational model.

Inventory

Short-Term Inv.

Other Current Assets

**Primary Transaction Comps:**
- Direct transaction comparables for the orderly liquidation of general office equipment and IT assets from a distressed online education company are not readily available in public records. The valuation relies on general industry recovery rates for similar asset classes in liquidation scenarios. (N/A)

**Replacement/Scrap Data:**
Replacement cost data is not a primary driver for Orderly Liquidation Value (OLV) as OLV focuses on the realizable value from a sale, not the cost to replace new assets. However, general industry benchmarks for fixed asset recovery rates in liquidation scenarios suggest a range of 1% to 50% of book value, with an average of 15%.

Net PP&E

Intangibles

Long-Term Inv.

Other Non-Current

Accounts Payable

Current Debt

Deferred Revenue

Other Current Liabilities

Non-Current Debt

Other Non-Current Liabilities

CFO David Longo receives retention agreement with increased compensation.

Chegg reported Q3 2025 results, restructuring to focus on B2B skilling market ($40B+ opportunity) while streamlining operations.

The Vanguard Group reports reduced 4.98% ownership in Chegg.

Chegg remains standalone company, announces restructuring and CEO change.

Chegg reported Q2 2025 financial results with a 36% year-over-year decrease in total net revenues to $105.1 million.

The Vanguard Group reports 6.77% ownership in Chegg.

BlackRock, Inc. reports 2.1% ownership in Chegg.

Stockholders approve proposals at 2025 Annual Meeting.

Chegg reported Q1 2025 earnings, exceeding revenue and adjusted EBITDA expectations, while announcing additional restructuring.

The Vanguard Group reports increased 7.82% ownership in Chegg.

Unavailable

Chegg receives NYSE non-compliance notice for sub-$1.00 share price.

Chegg paid $358.9 million upon maturity of 2025 convertible notes.

Chegg repurchases additional $8.6 million of 2026 convertible notes.

Chegg repurchases $56.6 million of 2026 convertible notes.

Chegg reported Q4 and full-year 2024 financial results while initiating a strategic review process and filing a complaint against Google and Alphabet.

Chegg Reports New Hire Equity Grants Under Nyse Rule 303A.08

D.E. Shaw & Co. reports 4.9% ownership in Chegg.

Chegg reported Q3 2024 financial results and announced restructuring due to AI-driven market challenges.

Updated Schedule 13G/A filing by BlackRock, Inc. with revised voting details

Chegg adopted new Severance Plan replacing Change-in-Control Severance Plan

Sarah Bond and Dr. Paul LeBlanc are departing from Chegg's board of directors.

Chegg reported Q2 2024 financial results with a net loss of $616.9 million and announced AI-driven product enhancements.

Chegg upgraded to Equal Weight from Underweight at Morgan Stanley

Chegg announced Nathan Schultz as incoming CEO effective June 1, 2024, with Dan Rosensweig transitioning to Executive Chairman alongside Q1 2024 earnings.

Esther Lem announces retirement as Chief Marketing Officer.

Chegg reported Q4 2023 and full-year 2023 results, appointing David Longo as new CFO effective February 21, 2024.

Chegg executes $150 million ASR with Morgan Stanley.

Chegg reported Q3 2023 financial results and began rolling out a new AI-powered user experience.

Amendment to Schedule 13G filing by Baillie Gifford & Co reporting ownership in Chegg, Inc.

Clarification of share request for Chegg's 2023 Equity Incentive Plan.

Chegg reported Q1 2023 financial results, highlighting aggressive AI investments including the launch of CheggMate in partnership with OpenAI.

Chegg reported 2022 financial results and provided 2023 guidance, highlighting subscriber growth.

Amendment to Schedule 13G filing showing reduced ownership position by Baillie Gifford & Co

Chegg reported Q3 2022 financial results with 4.8 million Chegg Services subscribers, a 9% year-over-year increase.

Chegg reported Q2 2022 results with 9% Chegg Services revenue growth and 5.3 million subscribers.

Chegg (CHGG) Stock: $20 Target From Goldman Sachs

Chegg increases securities repurchase authorization by $1 billion to $2 billion total.

Chegg announced Q1 2022 financial results with Chegg Services revenue growth of 14% YoY despite industry headwinds.

Chegg executes $300 million ASR with Bank of America.

Chegg reported 2021 financial results with 20% year-over-year revenue growth and provided 2022 guidance.

Artisan Partners filed Schedule 13G/A reporting reduced ownership below 5%

Chegg announced definitive agreement to acquire language learning platform Busuu

Chegg reported Q3 2021 results with revenue growth but noted an industry slowdown attributed to COVID-19 impacts.

Chegg reported Q2 2021 financial results with 30% YoY revenue growth and raised full-year guidance.

Chegg is in terminal decline, with revenue falling 42% YoY to $78 million in Q3 2025 as Google AI Overviews decimate its SEO funnel. The debate centers on whether the pivot to a $40 billion B2B skilling market can scale fast enough to offset the legacy decay, or if the company will run out of cash. With a fair value of $0.87 against a $0.855 price, the expected return of 1.75% provides no margin of safety, warranting an Unclear recommendation while awaiting a better entry point.

Executive Summary

The primary value driver is the successful transition to a B2B skilling model, which is expected to grow 14% YoY in Q4 2025. This pivot is catalyzed by corporate reskilling needs and is protected by a net cash balance of $49 million and a proprietary library of 130 million human-verified Q&A pairs.<ul><li>Driver: B2B Skilling Pivot</li><li>Catalyst: Sequential growth in Skilling revenue exceeding $20 million</li><li>Protection: Net cash position of $49 million</li></ul>Our variant perception is that the market has priced this company for inevitable bankruptcy, ignoring the significant liquidity runway and the potential for the skilling unit to stabilize the enterprise value. While the legacy business is decaying, the company's net cash position and aggressive cost-cutting to a $250 million expense run-rate suggest they have sufficient bridge capital to execute the turnaround, making the current price a highly asymmetric call option on survival.This is therefore not a bet on an operational turnaround by current management, but a special situation, asset-based investment with a clearly defined catalyst path involving a strategic review and a landmark antitrust lawsuit against Google.

Core Investment Rationale

Chegg operates a direct-to-student learning platform that is currently undergoing a radical restructuring. The company is splitting into two units: Chegg Skilling, a growth-focused unit targeting the $40 billion corporate reskilling and language learning market, and legacy academic services, which is being managed for cash generation. Revenue is primarily subscription-based, but the company is shifting toward a B2B model to reduce its dependence on SEO-driven traffic, which has declined 50% due to Google's AI Overviews.Core assets include a proprietary library of over 130 million human-verified Q&A pairs and 26 verticalized large language models (LLMs) designed for education. Key products include Chegg Study, Chegg Writing, and the Busuu language learning platform. The company's physical assets are being rationalized, with a planned 50% reduction in capital expenditures by 2026 and the closure of offices in the US and Canada to preserve cash.The competitive landscape is dominated by the existential threat of generative AI tools like ChatGPT and Google's AI Overviews, which have disintermediated Chegg's traditional SEO funnel. Chegg competes with other EdTech players such as Stride (LRN) and Adtalem (ATGE), though these peers are currently in an expansion phase while Chegg is in a structural retrenchment. The market is fragmented, but Chegg's 75% brand awareness among US college students remains a residual competitive advantage.Chegg's recent history is defined by a narrative of rapid decline and distress. Revenue collapsed from $716.3 million in FY 2023 to $617.6 million in FY 2024, a 13.8% decline that accelerated to a 32.4% YoY drop in the TTM period ending Q3 2025. This deterioration was driven by the permanent displacement of Chegg's SEO-dependent model by AI. In response, the company initiated a strategic review in Q4 2024, filed a landmark antitrust lawsuit against Google in February 2025, and underwent a leadership transition with Nathan Schultz becoming CEO. The company is currently executing a 45% workforce reduction to align its cost structure with its shrinking revenue base.

Business & Situation

<ul><li>Bull Case: The skilling business (Busuu and Chegg Skills) scales to $120 million by Year 5, offsetting legacy decay. Aggressive cost-cutting to a $250 million run-rate restores positive free cash flow by 2027.</li><li>Bear Case: Legacy revenue collapse accelerates beyond 40% YoY, overwhelming the nascent skilling growth. Google AI Overviews capture >80% of former search traffic, leading to a liquidity crisis before the pivot matures.</li></ul>The consensus view is that Chegg is a 'falling knife' whose core business has been rendered obsolete by free generative AI. The market is pricing in a high probability of failure, as evidenced by the stock trading at $0.855, well below its 200-day moving average of $1.13 and the NYSE $1.00 compliance threshold.Institutional ownership is in flight, with The Vanguard Group reducing its stake from 7.82% to 4.98% in 2025, and net institutional flow has been negative for four consecutive quarters.The EdTech industry is experiencing a bifurcated capital cycle. While peers like Stride and Adtalem are expanding with 12-17% revenue growth, Chegg is in a 'Bust' phase, destroying supply to survive. The secular shift toward AI-driven personalized learning is a tailwind for the sector but a structural headwind for Chegg's legacy content-library model.Our differentiated view is that the market is pricing in bankruptcy while ignoring the value of the proprietary Q&A assets and the probability of a forced catalyst through the strategic review process. The governance friction and the strategic review prevent 'value drift' by forcing management to either stabilize the business or seek a sale. Although the theoretical Net Liquidation Value is $0.00, the company's net cash position of $49 million and the potential for content licensing deals (which generated $4 million in Q1 2025) provide a bridge that the market is currently discounting at a 100% failure rate.The debate hinges on the velocity of the legacy decay versus the ramp of the B2B skilling unit. While the skilling unit is growing at 14% YoY, it currently represents only $15 million of the $78 million Q3 revenue. Until skilling revenue sequentially exceeds $20 million and legacy decay slows to under 20%, the risk/reward remains symmetric and lacks the necessary margin of safety for a Buy recommendation.Our analytical edge stems from a forensic analysis of the balance sheet and restructuring plan, giving us higher conviction in the company's ability to survive a liquidity crunch through 2026. By modeling the $250 million expense target and the debt reduction from $617.9 million to $77.9 million, we identify a survival runway that the equity market, focused on operational losses, is currently ignoring.

Core Thesis

Nathan Schultz became CEO on June 1, 2024, following a long internal tenure as COO and President of Learning Services. While he has deep operational knowledge, he lacks a verifiable external track record of leading a company through an existential crisis. Dan Rosensweig transitioned to Executive Chairman; while he led Chegg's growth from 2010 to 2021, the current structural crisis occurred during his final years as CEO, creating a credibility gap that the current restructuring must bridge.Capital allocation has been exceptional for a turnaround, characterized by a complete halt to buybacks and a singular focus on debt reduction. Total debt was reduced from $617.9 million in FY 2023 to $77.9 million in the latest quarter, and the company is now net cash positive with $49 million.Management has been candid about the 50% drop in Google traffic and the need for radical restructuring. However, the withdrawal of 2025 guidance in Q3 2024 and the subsequent downward revisions in absolute revenue targets have strained credibility with the sell-side.<ul><li>Board Independence: 78% (7 of 9 directors)</li><li>Chairman/CEO Roles: Separate (Rosensweig as Exec Chair; Schultz as CEO)</li><li>Chairman Tenure: 4 years (as Co-Chair)</li><li>Insider Ownership: 13.2%</li><li>Shareholder Rights: Classified Board, Majority Voting in Uncontested Elections</li></ul>The governance structure is currently in a transition phase, and we outline the following Governance Outcome Tree: 1. Status Quo: Management successfully executes the skilling pivot, leading to a slow recovery to the $0.87 fair value. 2. Compromise: The strategic review leads to the sale of the skilling unit or the legacy library to a tech peer, potentially unlocking $1.50+ in value. 3. Reset: The strategic review fails, and the company is taken private at a distressed valuation or faces a reverse stock split to maintain NYSE compliance. The lack of insider buying at $0.855 suggests the board is awaiting these outcomes before committing personal capital.

Leadership & Governance

We rely on the Net Liquidation Value of $0.00, which reflects that liabilities currently exceed the realizable value of tangible assets, providing no fundamental floor below the equity in a liquidation scenario.The base case assumes legacy revenue declines of 35% YoY in Year 1, with skilling revenue growing at 25% CAGR. Operating margins improve to -5% by Year 5 as the $250 million cost reduction target is met. This results in a fair value of $1.05.Successful monetization of the content library through licensing deals generates $50 million+ in annual high-margin revenue, accelerating the path to breakeven. Blue-Sky Potential: $2.02.The bear case assumes legacy revenue collapse accelerates to 45% YoY before skilling achieves scale, triggering a liquidity crisis. In this scenario, the equity value is $0.00, reflecting the risk of a failed turnaround.

Valuation Context

<ul><li>Sequential growth in Skilling revenue exceeding $20 million. This would provide the first concrete evidence that the B2B pivot is gaining sufficient traction to eventually offset legacy decay.</li><li>Outcome of the Strategic Review Process. A potential sale or go-private transaction would provide an immediate valuation floor and resolve the current equity discount.</li></ul>Chegg is at a critical juncture as it navigates a 42% revenue collapse and a landmark antitrust lawsuit against Google, with its stock price currently testing the $1.00 NYSE compliance floor.

Catalyst Path & Context

<ul><li>Existential Liquidity Risk. The primary risk is a 'race against time' where the legacy revenue collapse outpaces the skilling pivot, leading to negative free cash flow that depletes the $112 million cash reserve. Free cash flow was negative $0.9 million in Q3 2025, and revenue declined 42% YoY.</li></ul>

Primary Risks

<ul><li>Entry Target: Calculated threshold price required to restore a 30% expected return based on internal valuation.</li><li>Stop Loss: Set the stop-loss at $0.44, representing a clear break below the 2-year low. A break of this magnitude indicates that the turnaround thesis has failed and the risk of a zero-equity outcome has become unacceptable.</li><li>Position Size: Sizing reflects a 'None' posture while awaiting a more attractive valuation-based entry point. The final size was constrained by the structural risks inherent to the Turnaround_Candidate model, including the lack of a liquidation floor and the existential threat from generative AI.</li><li>Time Horizon: A transitional horizon of 12-24 months is required to allow the restructuring actions and the B2B skilling pivot to manifest in the financial statements.</li></ul><ul><li>Sequential Skilling revenue growth</li><li>Net institutional flow trends</li><li>Progress of the Google antitrust lawsuit</li></ul>A liquidity event, such as a failure to refinance the 2026 notes or a dilutive equity raise for survival purposes, would invalidate the thesis.

Actionable Parameters & Monitoring

Chegg is a turnaround candidate facing structural obsolescence of its legacy model, with a fair value of $0.87 anchored to a high-risk DCF. While the balance sheet has been repaired, the lack of a liquidation floor and the velocity of revenue decay create a symmetric risk/reward profile at current levels. We recommend an Unclear rating with a valuation target of $0.87, suggesting that new capital should only be committed at the $0.67 entry target to ensure a sufficient margin of safety.

Final Conclusion

Driver

Sequential growth in Skilling revenue exceeding $20 million

Catalyst

Protection

The skilling business (Busuu and Chegg Skills) scales to $120 million by Year 5, offsetting legacy decay. Aggressive cost-cutting to a $250 million run-rate restores positive free cash flow by 2027.

Bull Case

Legacy revenue collapse accelerates beyond 40% YoY, overwhelming the nascent skilling growth. Google AI Overviews capture >80% of former search traffic, leading to a liquidity crisis before the pivot matures.

Bear Case

Chegg is in terminal decline, with revenue falling 42% YoY to $78 million in Q3 2025 as Google AI Overviews decimate its SEO funnel. The debate centers on whether the pivot to a $40 billion B2B skilling market can scale fast enough to offset the legacy decay, or if the company will run out of cash. With a fair value of $0.87 against a $0.855 price, the expected return of 1.75% provides no margin of safety, warranting an Unclear recommendation while awaiting a better entry point.

The strategy has shifted from a defensive, cost-cutting posture focused on preserving the legacy academic business (FY2023 Q4 - FY2024 Q3) to a radical restructuring and pivot toward a dual-unit model (FY2024 Q4 - FY2025 Q3). The company has moved from 'AI as an efficiency tool' to 'AI as a disruptive threat requiring a business model overhaul,' ultimately splitting into a cash-generating legacy unit and a growth-focused B2B skilling unit.

Method	Implied Value	Weight	Weighted Value
DCF	$0.82	95%	$0.78
Comps	$1.79	5%	$0.09
Total Weighted			$0.87

CHGG

Price History

Key Metrics

Recent Activity

Valuation Table