Chegg spikes 37% on surging subscriber numbers as students make a broad transition toward online learning

• Chegg spiked as much as 37% Tuesday following a surge in subscribers as students transition to online learning amid the coronavirus pandemic.
• The online learning company reported first quarter earnings on Monday, topping analyst estimates.
• Chegg is not sure how long the positive trend will continue, as it's unclear when students across the country will be able to go back to physical schools.
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Shares of Chegg spiked as much as 37% to $61.33 on Tuesday after the company announced a surge in subscribers as students transition to online learning amid the coronavirus pandemic.

Chegg is an education technology company that provides digital and physical textbook rentals, online tutoring services, and other services aimed at making it easier for kids to learn in and out of school.

The company reported first quarter earnings on Monday that topped analyst estimates, and it raised its second quarter revenue guidance to above analyst expectations.

Here are the key numbers:

Revenue: $131.6 million, versus the $119.5 million estimate
Adjusted earnings per share: 22 cents, versus the 17 cents estimate
Chegg services subscribers: 2.9 million, up 35% year-over-year
Second quarter revenue guidance: $135 million to $137 million, versus the $118 million estimate

CEO Dan Rosensweig said Chegg saw three clear trends as students were required to leave physical schools and campuses and learn from home over the past few weeks:

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1. "We saw a substantial increase in new subscribers, both domestically and globally."

2. "We saw a marked increase in engagement from our existing subscribers."

3. "We are seeing a meaningful increase in the take rate of our new Chegg Study Pack, much earlier than we expected."

Chegg did not provide guidance for the second half of 2020 due to many unknowns "such as school start dates, enrollment trends, and whether schools will be taught on-campus, online or both," Chegg Chief Financial Officer Andy Brown said.

Analysts at JPMorgan were impressed by Chegg's quarterly results, according to a note published Tuesday morning.

The bank said it expected Chegg to be negatively impacted by the "shift to remote learning and widespread adoption of pass/fail grading policies."

Instead, JPMorgan is "encouraged by Chegg's strong trends 1Q into 2Q and the broader shift of higher education in Chegg's direction, whether done on or off campus."

The bank rates Chegg as neutral and increased its price target to $50 based on an 11x multiple on Chegg's estimated 2020 revenue.

Shares of Chegg are up 58% year-to-date.