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Chegg shares plunges more than 40% after the company says ChatGPT is killing its business



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The online education company Chegg shares tumbled after saying OpenAI’s ChatGPT is killing its business. According to Chegg’s CEO, the company witnessed significant growth in the interest of students towards OpenAI’s ChatGPT since March, which has resulted in impacting the growth rate of Chegg’s new customers. 

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 dropped by more than 40% after the company says ChatGPT is killing its business 

On Monday, Chegg’s CEO Dan Rosensweig stated during a conference call with the investors, “In the first part of the year, we witnessed no noticeable impact from ChatGPT on the growth of our new account growth and the company was able to reach its expectations on new sign-ups.”

He further stated, “However, students’ interest in ChatGPT has showcased a rise since March. This has resulted in us believing ChatGPT is having an impact on our new customer growth rate.” 

The online education company, which provides online tutoring and assistance with homework stated, the revenue is likely to be between $175 million and $178 million by this quarter. Apparently, which is far below the analyst consensus of FactSet which is an estimate of $193.6 million. 

On Tuesday, shares of Chegg closed down to a percentage of “48.41” to $9.08. 

Otherwise, Chegg topped the anticipations of the first quarter on the upward and downward lines, with an earning every share ex-items of 27 cents beyond analysts 26 cent estimate, and a revenue of approximately $188 million by beating a consensus of $185 million.

Morgan Stanley analyst Josh Baer slashed his price target to $12 from the previous price of $18 following the results. It was stated by the analyst that AI “completely overshadowed” the results. 

Meanwhile, the stocks were downgraded by Jefferies to hold from buying, citing the threat AI poses to Chegg. It was witnessed the wall street firm slashed its price target to $11 from $25. 

Chegg’s new AI product in collaboration with OpenAI 

Currently, Chegg is involved in developing its own Artificial Intelligence product, named “CheggMate”, which will assist students with their homework. This AI product is built in collaboration with ChatGPT’s creator OpenAI. However, it was stated by Jefferies analyst Brent Thrill, the impact of these products on students is uncertain. 

He stated, “Chegg is preparing to develop its own AI product called CheggMate beta in cooperation with the creators of popular AI chatbot ChatGPT, OpenAI by this month to particular users. As of now, no specific date has been selected for the launch.” 

It was further 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.”

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