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Chegg, Inc. Message Board

  • edwardnessario1 edwardnessario1 Feb 13, 2014 5:32 PM Flag

    Negative Gross Profit on Textbooks?

    Gross profit is basically negative on their textbook rentals now? Why would management report Ebitda without adding back textbook depreciation? This makes no sense. It seems like CHGG is buying text books for $100, renting it 2.5x for $28, then selling it for $15 = -$15 per book. And competition just intensified per management's comments on the call driving revenue per book down.

    This thing could unravel here...if the textbook business is just a money losing way to build a database, then CHGG is no more than a $650m market cap company that connects students to a call center in India to help them with their homework...pretty silly

    Huge call option volume today before the release...lots of Feb/Mar 7.50 and $10 strikes. These traders are going to have to dynamically hedge these positions...should be some interesting action tomorrow.

    IMO

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