Seeking Alpha

Chegg -1.8% AH on light profit outlook, textbook rental slowdown

  • Though Chegg (CHGG) soundly beat Q4 EPS estimates, the company is guiding for a $10M-$15M 2014 adjusted EBITDA loss, up from $4M in 2013. In addition, gross margin is expected to fall to 25%-27% from a 2013 level of 32%.
  • Nonetheless, Chegg is guiding for Q1 revenue of $70M-$72M and 2014 revenue of $310M-$320M, in-line with consensus estimates of $70M and $313.3M.
  • The cause of the margin weakness? Chegg's traditional print textbook rental business is under pressure: Sales only rose 3% Y/Y in Q4 to $60.5M. On the other hand, digital product/services revenue rose 70% to $16.7M.
  • Chegg had 6.9M memberships at the end of 2013, and 464K Chegg Study subscribers.
  • Q4 results, PR
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Comments (3)
  • vpg999
    , contributor
    Comments (121) | Send Message
     
    The company should never have gotten public, they are not ready for the big dance, the model is broken and unprofitable, they lose money on eTextbooks, a trainwreck. Look for this to trade to 1x digital revenues or $1 a share.
    13 Feb, 07:27 PM Reply Like
  • Brandond
    , contributor
    Comments (376) | Send Message
     
    Totally agree; if it pops tomorrow, I may short. You have inexperienced retail investors buying because they use the service but the model will never be profitable. Company's IPO was mispriced and any IPO buyers who have yet to sell are approx. 30% under water creating a large supply of sellers.
    13 Feb, 07:49 PM Reply Like
  • chubbychuggchegg
    , contributor
    Comment (1) | Send Message
     
    I get a chubby just thinking about chegg chegging investors so that college students have more cash to chugg drinks and use their chegg textbooks subsidized by ipo buyers as coasters at chugg chugg chugg parties
    14 Feb, 04:59 PM Reply Like
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