12:30 PM EDT, 07/16/2024 (MT Newswires) -- Chegg ( CHGG ) is set to see solid free cash flow generation ahead, pointing to a "more balanced risk/reward," even amid decelerating subscriber and revenue trends, Morgan Stanley said in a Tuesday note.

"We expect revenue to continue declining, but the recent restructuring adjusts Chegg's ( CHGG ) cost structure to better align with top-line trends," said the investment firm. The company recently announced a restructuring to cut costs and the expected opex and capex cost savings from this are seen as free cash flow drivers in 2025 and beyond, Morgan Stanley added.

Morgan Stanley also noted that Chegg's ( CHGG ) Q2 guidance points to "further deterioration" and the company faces artificial intelligence headwinds from increased competition. According to the investment firm, the company's stock already incorporates this negative growth and expected margin compression.

Morgan Stanley upgraded Chegg ( CHGG ) to equal-weight from underweight but lowered the stock's price target to $3.25 from $6.25.

Shares of Chegg ( CHGG ) were up more than 14% in recent trading.

Price: 3.60, Change: +0.43, Percent Change: +13.56