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James Tahany loads textbooks onto a pallet in preparation for shipment at Chegg’s warehouse in Shepherdsville, Kentucky, April 29, 2010.
John Somers II | bloomberg | Getty Images
Chegg Shares fell after the online education company said ChatGPT was hurting its growth.
“For the first part of the year, we didn’t see any significant impact from ChatGPT on our new account growth and we were meeting expectations on new sign-ups,” CEO Dan Rosensweg said during the earnings call Monday night. “However, since March we have seen a significant rise in student interest in ChatGPT. We now believe it has an impact on the growth rate of our new customers.”
The company, which offers online homework help and tutoring, said revenue will be between $175 million and $178 million this quarter, far below FactSet analysts’ consensus estimate of $193.6 million.
Chegg shares closed down 48.41% at $9.08 on Tuesday.
Chegg shares 1 day
Otherwise, Chegg beat first-quarter expectations on top and bottom earnings, with prior items earnings per share 27 cents beating analyst estimates of 26 percent, and revenue of $188 million to top the consensus of $185 million.
Following the results, Morgan Stanley analyst Josh Baer lowered his price target to $12 from $18. The analyst said Amnesty International was “totally overshadowed” by the findings.
Meanwhile, Jefferies has lowered the stock to save it from buying, citing the threat artificial intelligence poses to Chegg. The Wall Street firm cut its price target to $11 from $25.
Chegg is developing its own AI product, CheggMate, which aims to help students with their homework. The product was created in collaboration with OpenAI, which is developing ChatGPT. However, Jefferies analyst Brent Thill says the product’s impact is uncertain.
“While CHGG plans to beta release CheggMate this month for a select few, the timing of the full launch is unclear,” he said. “We don’t expect there to be any meaningful impact from CheggMate in FY23, believing that any potential impact won’t emerge until FY24 at the earliest.”
— CNBC’s Michael Blum and Brian Evans contributed reporting.
Correction: Shares of Chegg fell more than 40% on Tuesday, and CEO Dan Rosensweg spoke during the company’s earnings call Monday night. An earlier version misstated the days of the week.
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