In this episode of Left Brain Thinking, host Chuck Jaffe interviews Janice Quek, senior analyst at Left Brain Investment Research, about why the education‑technology company Chegg (CHGG) is viewed as a high‑growth investment despite the sector’s typical low‑growth perception. Quek explains Chegg’s diversified platform – online tutoring, expert Q&A, writing and math tools, textbook rentals, and professional upskilling courses via Thinkful – and highlights its rapid subscriber and sales growth, noting a 57% sales jump in 2020 and 28% the prior year, driven in large part by pandemic‑induced demand for on‑demand homework help (StudyPak) and career‑change training. The conversation then shifts to the broader e‑learning market, valued at over $200 billion today with a projected $375 billion in five years and a base of 102 million students, satisfying Left Brain’s market‑size criterion. Quek argues that the pandemic merely accelerated a secular shift toward on‑demand, internet‑based learning, likening it to streaming media, and that this trend will persist as schools remain under‑invested in technology. The interview concludes with a recap of Left Brain’s analytical framework – market opportunity, business momentum, and speed of growth – and a disclaimer that the discussion is not personalized investment advice.
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Welcome to Left Brain Thinking, where creative investment ideas meet logical analysis. That's the hallmark of Left Brain Investment Research, where the analysts are looking for growth companies with the potential to double in 2 to 3 years and high-yield bonds with the potential for dramatic price appreciation. Today we're talking with Janice Quek, senior analyst based in Singapore for Left Brain Investment Research, and we're talking about Chegg. An educational stock that has been what you might call an unexpected beneficiary from the pandemic. Janice Kwak, great to have you back on Left Brain Thinking.
It's good to be back, Chuck.
So Chegg, ticker symbol CHGG, and it's not the kind of company that you would have said, oh, fast growth in a pandemic, that's what I would expect. So why is it reaching the kind of growth potential that you guys like.
You're right, Chuck. The education industry isn't typically an area that investors would think of naturally when they're looking for high-growth stocks, but Chegg has caught our attention. It's a provider of an online learning platform for students. So Chegg offers a range of services such as online tutoring, expert question and answer, where you can send in your questions if you're facing difficulties in your homework and get an answer back in as little as 30 minutes. And they also have writing tools, math solvers, and you can also rent or buy textbooks. There is also another part of the business, which is online courses for professionals to study and get certification in a new skill if they're switching jobs. It's an interesting company that has seen lots of growth, and that's why Chegg has caught our attention.
As a father of now adult daughters, I was familiar with Chegg because of the textbook rental sort of thing, you know, back pre-pandemic times, and did not recognize that it had all of these different business areas that give it potential for growth. So you'd mentioned some of the areas that it does, which ones are driving the business right now? And obviously you've got to assume that the pandemic is helping the stock because it's making people want to learn online. But the areas of growth that you see, they're going to continue when the pandemic is over.
Yeah, there are a few interesting aspects of the Chegg business, Chuck. As you know, Left Brain has a list of criteria that we use to evaluate stocks of interest. It's what we call the Left Brain lens. And one of the things we look at is the size of the market opportunity. And in this case, we've seen how learning mediums have evolved since we entered the digital age. We're well into the era of the internet, and everyone is using it in some way or the other, including the education industry. Educational software can now be accessed over the internet to learn from anywhere. You can attend a live class or seminar, and so is on-demand learning and getting help for problems. And the professional world is also benefiting from these e-learning technologies, and we've seen how employees are now receiving training and upgrading their skills through learning platforms at their own time or remotely. So one of the great things about Chegg is that the market opportunity is huge. The e-learning market is valued at more than $200 billion today, and projections are for it to reach about $375 billion in the next 5 years. There are 102 million students out there today that can benefit from a service like Chegg. Another thing that we think that is interesting about Chegg is its business momentum. That's another criteria we look through the Left Brain lens. How much demand is there for this company's services? We see that as a driver of upward stock price action. And for Chegg, sales jumped 57% last year. Of course, remote learning from the pandemic was a contributor, but the year before it grew 28%. So there is good traction there for Chegg's products.
I know that at Left Brain you guys don't do targets. But if you're seeing growth and you see the drivers, what particularly makes it be so fast that it fits the speed category that's important to you?
I think one thing you've mentioned earlier was that Chegg is a beneficiary of the pandemic. It has been a huge driver and has benefited substantially from the pandemic. When schools moved online at the start of the pandemic, the company saw a huge surge in subscriber growth, both in the US and abroad. And, you know, without on-campus resources to get help for school assignments, many students really look to Chegg to get homework help. There was strong uptake of its StudyPak. It's a bundled subscription package that Chegg offers on its platform, and it includes things like expert question and answer service, math and writing tools, and Chegg Study, which also has solutions to textbook practice questions. And you can see how this will be popular with students at a time like this. And on the professional skills end, many people lost their jobs, and this was a time to rethink upgrading or career switches. Thinkful is Chegg's platform for online courses in certain fields like software engineering, data science, and digital marketing. So the pandemic really catalyzed demand for Chegg services, and that was part of the reason why the company saw sales accelerate in 2020.
Ultimately, I think the bigger thing here that we're not saying, but that I guess I want to draw from you, is not so much can this continue when the pandemic has ended? It's really more has Chegg tapped something where demand won't fall off after the pandemic? Because hey, if I'm a student and I find that there's a great resource for help, I'm going to want great resources for help. No matter what's happening with the economy. I mean, people talk about the pandemic accelerating a trend and making something that might have happened happen faster. Is this one of those cases where this was a business that was developing this stuff and the pandemic basically got it to prove to students and people who need an education that it's vital and that doesn't change and that doesn't go away when the pandemic goes away?
Yeah. So I think the pandemic catalyzed demand for tech services, but I think that the outlook for check services is very optimistic beyond the pandemic. I think they will continue to do well post-pandemic because qualitatively, I would argue that we have changed our expectations for assessing many kinds of services as the technology becomes available. You know, if we think about how we live today, so for example, we now stream movies and shows on demand. We listen to music or podcasts on demand. We shop anytime we want. You know, and for Chegg, they provide an on-demand homework help service and remote learning for professional service, so people can learn at their own pace and at any time that will fit their schedule. We think that this is a secular trend that won't go away. Schools are also underinvested in technology and resources. They're not able to provide the necessary support to help students when they need it. And e-learning in general, the technology now that it has become available has made learning more convenient, affordable, and accessible for students. So I think that something like tech services is gonna continue being demanded for even as the pandemic eases away.
Janice, great stuff. Thanks as always for joining us on Left Brain Thinking.
Thank you, Chuck.
Left Brain Thinking is a joint production of Left Brain Investment Research and MoneyLife with Chuck Jaffe. These conversations are not personalized investment recommendations but are designed to engage your brain. Please do your diligence before making any financial transaction. I'm your host, Chuck Jaffe, and you can find my weekday show on your favorite podcast app or online at moneylifeshow.com. Thanks to my guest, Janice Quek, senior analyst at Left Brain Investment Research. Learn more about her, the firm, and its analysis at leftbrainir.com. And on Twitter @LeftBrainIR. Left Brain Thinking is available every Wednesday. Plan to put your left brain thinking cap on each week by subscribing on your favorite podcast app. Until next time, stay safe, everybody.
