Chegg’s stock drops by almost 50% due to ChatGPT’s impact on their business.

Chegg Shares Tumble as ChatGPT Threatens Growth

Chegg, the online education company, has reported a significant spike in student interest in ChatGPT, which is now impacting its new customer growth rate. CEO Dan Rosensweig stated during the earnings call that the company saw no noticeable impact from ChatGPT on new account growth in the first part of the year, but since March, the impact has been significant. As a result, Chegg’s revenue for this quarter is expected to be between $175 million and $178 million, far below FactSet’s analyst consensus estimate of $193.6 million.

Investing News

• Jefferies downgraded the stock to hold from buy, citing the threat artificial intelligence poses to Chegg.
• Chegg is developing its own AI product, CheggMate, which is meant to help students with their homework.
• The impact of the product is uncertain, and Jefferies analyst Brent Thill says any potential impact won’t show up until FY24 at the earliest.

Despite beating first-quarter expectations on the top and bottom lines, Chegg shares closed down 48.41% to $9.08 on Tuesday. Morgan Stanley analyst Josh Baer slashed his price target to $12 from $18, stating that AI “completely overshadowed” the results. CheggMate is built in collaboration with OpenAI, which develops ChatGPT.

It remains to be seen how Chegg will navigate the impact of ChatGPT and AI on its business, but the company is taking steps to develop its own AI product to help students with their homework.

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