Seeking Alpha

Chegg gains on insider buy

  • Director/ex-Netflix CFO Barry McCarthy bought 30K Chegg (CHGG +5.1%) shares on Tuesday at $6.38. (Form 4)
  • The purchase comes a month after Chegg sold off in response to the light margin/EBITDA guidance it provided with its Q4 results, as the company tries to offset weakness in its traditional/high-margin textbook rental business by growing its digital revenue streams.
  • SA contributor Diamond Capital is a believer in Chegg's ability to pull off the transition, arguing this morning shares could eventually double.
Comments (1)
  • blam24
    , contributor
    Comments (71) | Send Message
     
    Diamond Capital appears to be one of the unfortunate investors who bought into the pre-IPO hype on Chegg and bought on the IPO date and are now down over 50%. Do your homework! Chegg is at the mercy of the college textbook publishers and they are not in a big hurry to make the switch from print to digital as quickly as Chegg would like and needs before its share price will recover. This will not happen overnight and is more likely a 5 year time horizon at best. And Chegg has other emerging competitors as that transition starts to occur. The only positive right now for Chegg is the membership growth of its Chegg Study program where they reported 464,000 members as of 12/31/13. But the higher margins from Chegg Study will not have the positive effect to offset the pressured, declining margins from the printed textbook segment. I do not buy into the latest hype on Chegg especially after listening in on its quarterly analyst call Q&A. I will watch from the sidelines as other investors who do their homework will also do.
    13 Mar, 11:12 AM Reply Like
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