Chegg (CHGG) shares fell by more than 40 percent after an earnings call on Monday evening. The education technology company mentioned that ChatGPT was affecting its operations. Shares fell 48 percent and stood at $9.01 during Tuesday trading. The homework assistance and online tutoring company is developing its own AI product called CheggMate, with ChatGPT but its impact remains uncertain, as of now.
On an earnings call, Chegg CEO Dan Rosensweig said that the company had not seen any “noticeable impact from ChatGPT” and new sign-ups were meeting company expectations in the beginning of the year. However, the company noticed that ChatGPT has piqued students’ interests since March. The CEO added that they were currently seeing an impact from ChatGPT on its “new customer growth rate.”
Chegg rose above expectations in terms of earnings per share as well as revenues. Analysts had estimated earnings-per-share ex-items of 26 cents while the company reported 27 cents. The estimated consensus revenue was $185 million. However, the online tutoring company reported $188 million in revenue for the quarter.
Chegg shares have been downgraded. Jeffries downgraded the company from Buy to Hold and gave a price target of $11; its prior price was $25. Goldman Sachs also gave it a downgrade and set a price target of $14.
Clegg also reported a much lower than expected second quarter guidance. It also said that it would not provide guidance beyond the second quarter.
Chegg is planning to launch CheggMate that will be created using OpenAI’s GPT-4 technology. However, the beta version has not yet been launched. Its performance will be difficult to gauge till fall or maybe even in 2024.
Jeffries does not believe that Chegg’s AI product will have an impact until the passage of multiple quarters. It predicts that the shares of the education tech company are fairly valued with no growth.
