CHGG: 20% downside / 200%+ upside?

I ran a financial analysis on Chegg (CHGG) and... I think Wall Street might be more asleep than Chegg's users during online exams!

Exactly like GME: fundamentals are questionable but tons of value. It should seriously squeeze.

In a nutshell:

-the market cap ($80m) is currently largely below the net asset position value ($213m), while the company is cash flow positive with more than $400m+ of revenues

-a cost cutting plan is currently being implemented and there is a lot to cut: the company spent $170m on R&D in 2024...

-the management has initiated a strategic review: "we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction" (this quote is from Q4 24).

-Market cap is so low compared to the net asset value, the stock could easily do 2-3x when the outcome is announced; Goldman Sachs has been hired.

-In addition, a lawsuit has been filed against Google who is previewing Chegg's content in AI-powered search (IP infringement): Chegg could get up to c. $500m in compensatory damages due to revenue loss caused by AI Overviews (estimated at c. $100-200m annual hit)

-Yes, the topline is currently declining 20%: this is a similar growth profile to what is coming for Tesla... except that we are on less than 2x P/E and less than 1x EBITDA, while having a positive net asset position at 3x the market cap!

-Finally, the stock is highly shorted

This is not a financial advice, just my own analysis.

***

Few numbers below as of 31-Dec-24:

-Market cap of $80m (current market cap as of today)

-Cash: $161m

-Short-term investments (government bonds): $154m

-Long-term investments (government bonds): $213m

=> total cash + government bond position: $528m

-Liabilities: a convertible bond: $359 + $127 = $486m

=> Net cash position = $42m

-Properties: $171m

=> Net cash position + value of properties = $213m (2.7x the market cap!!)

https://preview.redd.it/7dd6th0jcaoe1.png?width=1411&format=png&auto=webp&s=a9b914e7eadb513883c0d66d2daedc31de50b893