Is there a fee associated with having pupils use ChatGPT for schoolwork? Chegg Inc (CHGG.N), a supplier of educational services in the United States, might see its market capitalization rise to about $1 billion.
Chegg’s stock dropped 44% in premarket trading on Tuesday after the company issued a weak sales prediction for the current quarter and hinted that the popularity of the chatbot ChatGPT was stifling its client growth.
The number of students using ChatGPT has increased dramatically since March. As a result, Chegg CEO Dan Rosensweig said, “we now believe it is having an impact on our new customer growth rate.”
Analyst Brent Thill at Jefferies downgraded the stock to “hold” because of concerns that Chegg’s core business will become extinct as customers experiment with free artificial intelligence (AI) solutions.
The Santa Clara, California-based company said last month that it will release ChatGPT’s AI-powered CheggMate, a study tool customized to students’ requirements, at a time when teachers were struggling with the repercussions of the assignment drafting chatbot.
Analysts, however, were uncertain whether CheggMate was sufficient to offset the decline in the company’s primary business.
Thill expressed concern that Chegg would lose market share even before CheggMate was widely available.
Chegg’s main UK competitor, Pearson PLC (PSON.L), dropped its stock price by nearly 9% on Tuesday.
Chegg said it was postponing its full-year estimate because of the impact uncertainties. It projected second-quarter total sales between $175 million and $178 million, below Wall Street expectations of $186.3 million.
According to Arvind Ramnani, an analyst at Piper Sandler, “dancing in the rain without getting wet” describes Chegg’s challenges as it adapts to a quickly shifting market.