By Christiana Sciaudone

Investing.com – Try to find a reason not to buy Chegg (NYSE:). It’s a tough reason.

The online textbook, tutoring and skills acceleration company has seen seven consecutive quarters of sales growth of 25% or more. Last quarter, that number was a whopping 63%, showing that Chegg is not only weathering the epidemic, but thriving as well. As further proof, it highlighted its guidance for 2020, citing the fact that U.S. schools remain closed for the fall semester and international demand is surging.

Even BMO Capital’s Jeff Silber is optimistic, holding one of two equal ratings on the stock.

“They have tremendous room for growth in the future,” Silber said in a phone interview.” Valuation is the biggest issue. This stock has been going up.”

Silber is an outlier among its peers. According to analysts tracked by Investing.com, 10 of the 12 analysts covering the stock rate it a Buy. While Chegg has more than doubled in 2020 and its forward P/E ratio is currently about 60. compare that to Alphabet’s (NASDAQ:) 35, Facebook’s (NASDAQ:) 33 and Apple’s (NASDAQ:) 34. The company said it does not comment on valuations.

While Google, Apple and Facebook have pretty much conquered the world, Chegg still has a ways to go. Chief Business Officer John Fillmore, for example, says the total addressable market consists of millions of students worldwide.

“At the core of what we’re doing is that there’s so much opportunity,” Fillmore said in an Aug. 12 video interview.

Last year, Chegg’s sales were up nearly 30 percent in 2019 over 2018. Then Covid-19 struck, closing schools and forcing students from kindergarten through college to study at home. Meanwhile, international demand has exploded, from Turkey to South Korea.

“It’s a runaway train for us, and we expect we’re really just scratching the surface in terms of continued growth,” Fillmore said.

Fillmore cites STEM (science, technology, engineering and math) materials already taught in English as easily accessible to countries where English is not the native language.

“It’s a huge windfall for our international expansion,” says Fillmore.Chegg will focus on investing in international markets, including translating content into local languages. Its foreign students largely do not study at U.S. institutions.

“Only 1 percent of our international customers actually go to school in the United States. So these are all new customers for us.” Chief Executive Officer Dan Rosenzweig said during the second-quarter earnings call earlier this month.” So I know there’s some speculation as to whether these are international clients that are subscribing domestically when they get home, but we’re obviously monitoring these things and frankly we’re taking brand new clients all over the world and over 99% of them are brand new to Chegg.”

To be sure, Chegg isn’t the only company with a mission to serve students around the world. The Santa Clara, California-based company competes with Course Hero, Varsity Tutors, Quizlet and Bartleby, not to mention the emerging locals who are already fluent in their native language and culture.

Fillmore pushed back against the competition, saying that no other company can offer Chegg’s full suite of services.

“One reason we’re seeing extraordinary growth is that we’re unique,” says Fillmore.

But one of their major challenges isn’t unique. Like Netflix (NASDAQ:) and others, Chegg has a recognized challenge with sharing passwords among students. While the situation has improved now that most users have scattered home, it’s still an issue.

Fermor acknowledges that the company has a responsibility to continue working on the issue, which Rosenzweig notes is a priority for the company.

“We’re implementing systems to address account sharing and investing in facility management controls,” Rosenzweig said on the earnings call.

Another big area of focus for Chegg is in skills acceleration, through their 2019 acquisition of Thinkful, which offers programs in data science, software engineering and digital marketing. Fillmore said that students don’t just go to school to get an education. About 80 percent of them go to college because they want a job, but the traditional college journey isn’t for everyone. According to Fillmore, many people end up in jobs that don’t require a college degree to begin with and, of course, swim in debt after graduation.

Add to that the fact that tech giants like Alphabet say potential employees don’t need a four-year degree, and more and more people will forgo an expensive and lengthy four-year college education in favor of a highly effective program to strengthen the skills necessary to take on the workforce.

“The beautiful thing is that unlike universities, where you may or may not change their curriculum, we can always offer the most relevant courses for the jobs that need them the most, and that’s what Thinkful is all about,” said Rosensweig.” So we’re super excited about Thinkful’s future right now.”

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2020-08-16