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Chegg, Inc. (NYSE:CHGG), a leading provider of educational services currently trading near its 52-week low, has entered into privately negotiated agreements to repurchase a portion of its 0% Convertible Senior Notes due 2026. On Monday and Tuesday, the company agreed to buy back approximately $8.6 million of these notes for a total cash consideration of about $7.6 million. This transaction follows a recent repurchase of $56.6 million in principal amount of the same notes for $49.8 million, as reported on Monday. According to InvestingPro data, management has been consistently pursuing aggressive share buybacks despite the company’s market capitalization now standing at approximately $100 million.
The combined repurchases total $65.2 million in principal amount for a cash outlay of $57.4 million. These transactions are part of Chegg’s previously announced securities repurchase program and are expected to be finalized on Friday, subject to customary closing conditions. After the completion of these transactions, around $62.7 million in principal amount of the 2026 Notes will remain outstanding, with $150.1 million still available for repurchases under the company’s buyback initiative. InvestingPro analysis suggests the stock is currently undervalued, trading at a relatively low revenue multiple despite maintaining impressive gross profit margins of over 70%.
The repurchase initiative is a strategic move by Chegg to manage its capital structure and return value to shareholders. It reflects the company’s confidence in its financial strength and commitment to efficiently allocating its resources, though InvestingPro data shows the company’s current ratio of 0.83 indicates some pressure on short-term liquidity. For deeper insights into Chegg’s financial health and 15+ additional ProTips, access the comprehensive Pro Research Report available exclusively to InvestingPro subscribers.
Chegg’s actions are forward-looking and involve certain risks and uncertainties, including market conditions and the fluctuating price of its common stock. These factors could potentially affect the completion and final terms of the repurchase transactions.
The information reported is based on a press release statement filed with the Securities and Exchange Commission on Wednesday.
In other recent news, Chegg Inc . reported its fourth-quarter 2024 earnings, revealing a slight miss on earnings per share (EPS) compared to forecasts. The company posted an EPS of $0.17, falling short of the expected $0.19, and reported revenue of $143.5 million, slightly below the anticipated $143.97 million. This marks the 11th consecutive quarter of revenue decline for Chegg, with a 24% year-over-year decrease. Additionally, the full-year revenue for 2024 saw a 14% decline compared to the previous year. Looking ahead, Chegg’s guidance for the first quarter of 2025 suggests a continued downward trajectory, with projected revenue declining by 34% year-over-year at the midpoint. In response to these challenges, Chegg is undergoing a strategic review process to address its struggling business. Furthermore, Jefferies analyst Brent Thill adjusted Chegg’s price target to $1.20 from the previous $1.40, maintaining an Underperform rating due to ongoing business challenges, particularly the impact of artificial intelligence on its operations. Chegg has also entered into agreements to repurchase approximately $56.6 million of its outstanding 0% Convertible Senior Notes due in 2026, as part of its securities repurchase program.
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