CHGG shorts rebuild as stock tests $1 again

Chegg heads into the week of May 13 in an uncomfortable spot — the stock gave back a quarter of its value in five sessions, short sellers are adding positions, and the Street has essentially abandoned coverage.

Short interest has risen meaningfully. At 7.5% of free float, it is near the highest level of the past two months, up roughly 6% week-on-week and 14% over the past month. The move accelerated after the Q1 earnings release on May 6: short positioning had eased through mid-April, dropping to around 6% of float, before reversing sharply higher as the stock failed to hold above $1. That's a clear signal — the bounce off April lows attracted fresh shorts, not renewed buyers.

The lending market offers little comfort to a potential squeeze narrative. Availability is generous, borrow costs a negligible 0.55%, and the borrow pool is nowhere close to stressed. Far from an imminent squeeze, the setup suggests shorts can add with ease. Options positioning tells a similar story: the put/call ratio of 0.08 is barely above its 20-day average of 0.077, sitting less than half a standard deviation above the mean. Option traders are not pricing in alarm. They're not pricing in much at all — the ratio is near the low end of its 52-week range of 0.06 to 0.22.

The Street's view is uniformly cautious, bordering on indifferent. The single analyst holding a published rating has it at Hold, and the last significant action from a bellwether firm was JP Morgan's downgrade to Underweight in April 2025. Morgan Stanley also moved to Underweight in January 2025. Analyst target prices from late 2024 and early 2025 ranged between $1 and $2 — with the stock now trading at $0.93, some of those targets have essentially been met on the downside. The analyst consensus data carries a December 2025 timestamp, so treat any implied return potential with caution. The ORTEX short score of 46.9 is middling, having drifted down from around 47.6 in early May, reflecting the mix of rising short interest but loose borrowing conditions.

The bull case, such as it is, hinges on cost restructuring: Chegg projected $45–55 million in non-GAAP savings for FY2025 and $100–110 million for FY2026, alongside $120 million from 2025 restructuring. The bear case is harder to dismiss — Q1 2025 saw a 30% year-on-year revenue decline, subscription revenues fell at the same rate, and operating margins ran deeply negative. The stock's one-month bounce of 16% ahead of the May earnings print proved short-lived. The day-after reaction to Q1 results was a 20% drop.

CEO Daniel Rosensweig holds 6.8% of the company and picked up 100,000 shares in February at $0.56 — his only buy in the recent trade log. Since then, both he and CFO David Longo have resumed routine sales. The net insider flow over the past 90 days is marginally positive at around $355k, but that reflects the February purchase rather than any fresh conviction. Galloway Capital Partners entered the register in early April with a 2.8% stake — worth watching as the only new institutional name to appear recently.

The next earnings event falls on June 12. Given last quarter's 20% one-day drop, that date will matter more than usual for positioning.