Chegg Shares Plunge After OpenAI’s ChatGPT Kills Its Business
If you’re a fan of online education, then you must have heard about Chegg. It’s one of the most popular online tutoring and homework assistance platforms, serving millions of students worldwide.
However, it seems like Chegg is facing stiff competition from OpenAI’s ChatGPT, and the results are starting to show.
In this article, we’ll discuss the recent developments and what they mean for the future of online education.
Key Points:
- More than 40% Shares of online education company Chegg after the company CEO stated it is killing its business.
- A significant spike was noticed in students’ interest in ChatGPT since March.
- Chegg is soon launching its own AI product named “CheggMate” in collaboration with OpenAI.
Chegg’s Shares Plunge by More than 40%
Chegg’s shares have plunged by more than 40% after the company’s CEO, Dan Rosensweig, stated that OpenAI’s ChatGPT is killing its business.
According to Rosensweig, the company has witnessed a significant spike in the interest of students towards ChatGPT since March, which has impacted the growth rate of Chegg’s new customers.
Chegg’s Revenue is Likely to be Below Analyst Consensus
Chegg, which provides online tutoring and assistance with homework, stated that the revenue is likely to be between $175 million and $178 million this quarter.
Apparently, this is far below the analyst consensus of FactSet, which is an estimate of $193.6 million.
This news has further contributed to the drop in Chegg’s shares, which closed down to a percentage of “48.41” to $9.08 on Tuesday.
CheggMate – Chegg’s AI Product in Collaboration with OpenAI
In response to the growing competition, Chegg is currently developing its own Artificial Intelligence product, named “CheggMate”. This AI product is built in collaboration with ChatGPT’s creator OpenAI and will assist students with their homework.
However, it remains to be seen how effective CheggMate will be in countering the threat posed by ChatGPT.
CheggMate Beta to Launch Soon
CheggMate is expected to launch beta versions for particular users by the end of this month.
However, the impact of these products on students is uncertain, according to Jefferies analyst Brent Thrill. He stated, “We aren’t expecting any major impact from Chegg’s AI product CheggMate by FY23.
Instead, we believe there won’t be any major impact showcased by the AI product until FY24.”
Jefferies Downgrades Chegg to Hold from Buying
The growing competition from ChatGPT has also prompted Jefferies to downgrade Chegg’s stocks from buying to hold.
The Wall Street firm has also slashed its price target to $11 from $25, citing the threat AI poses to Chegg.
Morgan Stanley Analyst Slashes Chegg’s Price Target
Morgan Stanley analyst Josh Baer has also slashed Chegg’s price target to $12 from the previous price of $18 following the results.
He stated that AI “completely overshadowed” the results, which is a clear indication of the growing threat posed by ChatGPT.
What caused Chegg’s shares to drop more than 40%?
A: Chegg’s shares dropped due to the CEO’s statement that OpenAI’s ChatGPT is killing its business. The company witnessed a significant rise in students’ interest in ChatGPT since March, which impacted the growth rate of Chegg’s new customers.
What is ChatGPT?
A: ChatGPT is an AI chatbot created by OpenAI that can hold conversations with humans in natural language.
What is Chegg?
A: Chegg is an online education company that provides online tutoring and assistance with homework.
What is CheggMate?
A: CheggMate is Chegg’s own AI product that the company is developing in collaboration with OpenAI. It will assist students with their homework.
When will CheggMate be launched?
A: The launch date for CheggMate has not been selected yet, but it is expected to be released to particular users by this month.
What impact is Chegg’s AI product CheggMate expected to have?
A: Jefferies analyst Brent Thrill stated that they are not expecting any major impact from Chegg’s AI product CheggMate by FY23. Instead, they believe there won’t be any major impact showcased by the AI product until FY24.
What was the revenue estimate for Chegg this quarter?
A: Chegg stated that the revenue is likely to be between $175 million and $178 million this quarter, which is below the analyst consensus of FactSet’s estimate of $193.6 million.
Final Thoughts
The online education industry is evolving rapidly, and new players are entering the market every day. Chegg’s recent struggles with ChatGPT are a clear indication that companies need to stay on their toes if they want to stay ahead of the competition. CheggMate may be Chegg’s answer to ChatGPT, but only time will tell if it’s effective.
