Dan Rosensweig, CEO, Chegg

Scott Mill | CNBC

Chegg The stock returned to the positive side on Wednesday after the online education company lost half its value the previous day on concerns about the potential impact of ChatGPT on its business.

By early afternoon New York time, shares of Chegg were up 17% to $10.63. But this is still well below Monday’s closing price of $17.60.

CEO Dan Rosensweg told CNBC after the market closed Tuesday that the stock’s drop during regular trading hours was “extraordinarily exaggerated.” Shares fell after Chegg’s earnings report late Monday, when the company chose not to give annual guidance due to uncertainty surrounding ChatGPT, the popular artificial intelligence chatbot OpenAI.

While first-quarter revenue and earnings beat estimates, Rosensweig cautioned on the call with analysts that ChatGPT “had an impact on the growth rate of our new customers.”

Chegg is set to launch CheggMate, its GPT-4-powered artificial intelligence platform, this month. Combining GPT with Chegg’s trove of academic data could be transformative, Rosensweig said, but it’s unclear what the uptake will be and how well it will monetize.

Analysts at Piper Sandler, which has an equivalent rating on the stock, said in a report that there are important questions surrounding the pricing model, AI-related expenses, and whether developments in AI “democratize their core offering to the point where competitive barriers are lowered.” The company cut its price target per share to $11 from $17.

Rosensweig reminded investors, during the CNBC interview, that Chegg generates free cash flow and dividends, on an adjusted basis, and has “more than enough cash to pay off our debt.”

“I think that’s extraordinarily exaggerated, and I don’t usually say that, I don’t talk much about the share price,” Rosensweg said.

It’s been a tough couple of years for Chegg’s investors. Since peaking at over $113 in February 2021, the stock has lost more than 90% of its value, pushing its market value below $1.3 billion.

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