Chegg Stock Trades at a Discount: Should Investors Buy It Yet?

Chegg, Inc.’s CHGG current valuation looks promising for investors. The stock is currently trading at a discount compared with the Zacks Internet – Software industry and the broader Computer and Technology sector, with a forward 12-month price-to-sales (P/S) ratio of 0.36. The industry’s average currently stands at 4.76, while the sector’s valuation is 7.42.The U.S. education market continues to shift toward digital, career-focused and workforce-aligned learning models, as students and employers prioritize flexible, outcome-driven skill development. At the same time, the rapid adoption of AI is reshaping how learners access information, accelerating the transition away from traditional academic services toward scalable digital and skilling platforms.Within this evolving edtech landscape, this California-based education technology company is reshaping its business to adapt to AI-driven disruption and changing demand. Chegg is refocusing resources on the skilling segment, which targets workforce training, language learning and job-relevant skills, while managing its legacy academic offerings for cash generation. A leaner cost structure and greater emphasis on B2B partnerships are central to the company’s efforts to stabilize performance and position the skilling business for sustainable growth.CHGG Trades at a Discount to the Industry AverageImage Source: Zacks Investment ResearchFurthermore, CHGG stock is also trading at a discount compared with some of its industry peers, such as Coursera COUR, Udemy UDMY and Duolingo DUOL, which trade at substantially higher valuations due to stronger user growth and engagement metrics. Coursera, Udemy and Duolingo trade at 1.52X, 1.04X and 6.59X, respectively.CHGG’s Past Six Months Price PerformanceImage Source: Zacks Investment ResearchShares of Chegg have declined 30.6% over the past six months, lagging the industry’s 6.2% drop, while the broader sector and the S&P 500 posted gains of 19.5% and 14.4%, respectively. This sharp divergence has left the stock trading at discounted levels, prompting a closer look at the factors that could support its valuation and longer-term growth potential.Chegg’s Structural Reset Aims to Restore ProfitabilityChegg has undertaken a broad reorganization to realign the business for long-term sustainability rather than short-term traffic recovery. The company reshaped operations into two distinct units, separating its legacy academic services from the growth-oriented skilling platform. This structure allows Chegg to concentrate investment on higher-growth opportunities while operating the academic business with a sharper focus on efficiency and cash generation.The financial impact of these actions is already visible. In the third quarter of 2025, non-GAAP operating expenses declined 46% year over year, driven by restructuring initiatives, while adjusted EBITDA exceeded internal expectations. Management also expects total non-GAAP expenses to fall from $536 million in 2024 to below $250 million by 2026, indicating a significantly leaner operating model ahead.Academic Services Provide Cash Support During the TransitionAlthough Chegg’s academic services have been pressured by AI-driven disruption and weaker search traffic, it continues to view this segment as a valuable asset. A large and established content base enables efficient operations, as most student queries draw from existing material rather than requiring new production.This allows the academic unit to function as a cash-generating business even amid lower traffic levels. Management emphasized that this segment can continue to contribute cash over multiple years, effectively funding investment in skilling while the company completes its strategic shift.Skilling Platform Momentum Supports Chegg’s TransitionThe company’s strategic reset is anchored by the consolidation of Busuu and Chegg Skills into a single Chegg Skilling unit. This business is already gaining traction, with the company projecting 14% year-over-year revenue growth for the fourth quarter of 2025 and expecting sustained double-digit growth beyond 2025. Demand for workforce upskilling in AI, language learning and job-relevant skills continues to strengthen, aligning with broader corporate training trends.The company is increasingly focused on B2B distribution, where contract-based relationships offer greater stability than traditional consumer-driven models. Partnerships such as Guild, improving engagement trends, growing seat adoption and planned geographic expansion are supporting momentum in this segment, reinforcing skilling as the core driver of Chegg’s next growth phase.Cash Discipline and Capital Efficiency Strengthen the FinancialsChegg’s transformation also includes a renewed emphasis on capital efficiency and free cash flow generation. While near-term cash flow was affected by restructuring-related one-time items, the company expects a meaningful improvement as these costs roll off and the leaner cost structure takes hold. The company reiterated expectations for meaningful free cash flow improvement in 2026.Capital efficiency is improving alongside this reset. Capital expenditures in the third quarter of 2025 declined 63% year over year and Chegg expects a further reduction of roughly 60% in 2026, supported by internal AI development.Earnings Estimate Revision Trend Positive for CHGGChegg’s earnings estimates for 2026 have trended upward over the past 60 days to 18 cents per share. The estimated figures for 2026 imply year-over-year growth of 228.6%. Image Source: Zacks Investment ResearchIn contrast, Coursera’s earnings in 2026 are expected to rise year over year by 18.3%, while Udemy’s earnings are likely to remain flat during the period. Duolingo’s earnings are expected to decline 51.3%.Should You Include CHGG Stock in the Portfolio Now?Even with the sharp pullback, Chegg’s valuation now sits at a level that invites a closer look. The company’s restructuring efforts, improving cost discipline and growing focus on skilling and workforce-aligned offerings provide a clearer path toward stabilization and recovery. While challenges in legacy academic traffic and student behavior persist, the discounted valuation and improving earnings outlook help balance near-term risks.With a Zacks Rank #1 (Strong Buy) at present, CHGG stock offers an attractive risk-reward setup for investors willing to look beyond near-term volatility. You can see the complete list of today’s Zacks #1 Rank stocks here.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chegg, Inc. (CHGG): Free Stock Analysis Report Coursera, Inc. (COUR): Free Stock Analysis Report Duolingo, Inc. (DUOL): Free Stock Analysis Report Udemy, Inc. (UDMY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks