Digital education company Chegg (NYSE:CHGG) has been one of the hottest investments in the stock market for the past several years for a good reason. CHGG stock is up 400% over the past two years. During that stretch, the student-first education company has pivoted from renting out textbooks and study materials to running a connected learning platform with high-margin software revenues.

That pivot continues today.

Chegg just reported second-quarter earnings. They were excellent. It was yet another double-beat-and-raise quarter. Services revenue growth accelerated quarter-to-quarter from 37% to 38%. The textbook business went from declining last quarter to rising this quarter. Total revenue growth accelerated from 23% last quarter to 32% this quarter. Margins expanded, and earnings doubled year over year.

The quarter emphasizes one crucial thing about CHGG stock: this is a long-term winner. The company is changing the game in the education industry and providing services that high school and college students across America need. Competition is next to nothing. Brand awareness is high. Growth is big. The addressable market is big. Margins are high.

All together, CHGG stock is supported by everything you want in a long-term winner. As such, this stock looks like a solid long-term investment.

Here’s a deeper look.

Second Quarter Earnings Were A Needle In A Bloody Haystack

This earnings season, high-growth tech stocks have been running into a brick wall.

Think Netflix (NASDAQ:NFLX), which dropped 15% on a subscriber miss. Or Facebook (NASDAQ:FB), which dropped 20% for the biggest stock market value wipe-out in history on a down guide. Or think Twitter (NYSE:TWTR), a stock which has dropped more than 30% in a few days after the company reported a surprising drop in monthly active users.

Against this backdrop, it is very healthy to see Chegg not only report great second-quarter numbers, but also to see CHGG stock rally in response to those numbers. This beat-and-rally action in CHGG stock speaks to the resiliency and longevity of the underlying growth narrative.

Indeed, the company’s numbers were very good. When it comes to CHGG stock, it is all about Services growth. This is the software part of Chegg’s business that generates the most value, has the highest margins and has the biggest growth potential. It includes areas like digital tutoring, online homework help, guided solutions, writing help and more.

Adoption of these services continues to be promising, likely because the era of connected learning is upon us. That is why Services revenue growth in Q2 was 38%, up from 37% last quarter. So long as connected learning services continue to grow in popularity (as they should, because connected learning is just a byproduct of the digital shift), then Chegg is an accelerating growth story.

Accelerating growth in Services sets the whole business up for success. Services revenues are high margin (~80% gross margins), so bigger services growth means even bigger profit growth. Plus, a lot of this revenue is recurring revenue, so it lends itself towards year-to-year revenue stability and predictability.

Overall, then, Chegg’s second-quarter numbers were a strong affirmation of this company’s long-term growth narrative. Consequently, CHGG stock rallied on the report — and that is a healthy sign from an investor sentiment standpoint.

Long-Term Growth Story Looks Promising

The reason CHGG stock has promising long-term potential is because this company is in the early stages of disrupting a huge industry.

There are 36 million high school and college students in America. All 36 million of those students could benefit from using Chegg as their connected learning platform. Today, though, Chegg only has 2.2 million subscribers.

Thus, Chegg is tapping into only about 6% of its total addressable market in the United States. Competition is essentially next to nothing and brand awareness for Chegg is sky-high (the brand’s unaided awareness among college students is second to none, above even Amazon (NASDAQ:AMZN)). Thus, without meaningful competition and with high brand awareness, the pathway for Chegg controlling 50% or more of this market in the next 5-10 years has a ton of clarity.

I really don’t think it is unreasonable to assume Chegg hits 18 million subscribers in the future. Assuming subscriber growth rates cool to around 30%, it will take Chegg roughly 8 years to get to there. Each subscriber currently pays around $80 per year. At that rate, 18 million subscribers will translate into $1.44 billion in subscriber revenues by fiscal 2025.

Gross margins will run around 80%. The opex rate should fall to about 45%, thanks to leverage. Putting those margins on $1.44 billion, I think Chegg can do about $2.50 in earnings per share by fiscal 2025. A growth average 20 forward multiple on that implies a long-term price target for this stock of $50.

Bottom Line on CHGG Stock

Near-term, CHGG stock looks good because it survived the high-growth tech stock apocalypse that has transpired this earnings season.

Long-term, CHGG stock looks good because it is a relatively small company disrupting a huge traditional education industry. So long as Chegg remains America’s most popular student-first connected learning platform, then CHGG stock could hit $50 in the long-run.

As of this writing, Luke Lango was long CHGG, FB, and AMZN.