Dan Rosensweig, CEO, Chegg
Scott Mlyn | CNBC
Chegg’s stock returned to the plus side on Wednesday after the online education company lost half its value a day earlier due to concerns about the potential impact of ChatGPT on its business.
As of early afternoon New York time, Chegg shares were up 17% to $10.63. But that’s still way below Monday’s closing price of $17.60.
CEO Dan Rosensweig told CNBC after the market close on Tuesday that the stock’s plunge during regular trading hours was “extraordinarily overblown.” The shares had plummeted following Chegg’s earnings report late Monday, when the company opted not to give annual guidance because of uncertainty surrounding OpenAI’s ChatGPT, the popular artificial intelligence chatbot.
While revenue and earnings in the first quarter topped estimates, Rosensweig warned on the call with analysts that ChatGPT was “having an impact on our new customer growth rate.”
Chegg is slated to launch CheggMate, its GPT-4 powered AI platform, this month. Rosensweig said the combination of GPT and Chegg’s trove of academic data could be transformative, but it’s unclear what the uptake will be and how well it will monetize.
Analysts at Piper Sandler, who have the equivalent of a hold rating on the stock, said in a report that there are significant questions surrounding the pricing model, AI-related expenses and whether advancements in AI “democratize their core offering to the extent that their competitive barriers are lowered.” The firm cut its price target on the stock to $11 from $17.
Rosensweig reminded investors, during the CNBC interview, that Chegg generates free cash flow and earnings, on an adjusted basis, and has “more than enough cash to pay off our debt.”
“I think this is extraordinarily overblown, and I don’t normally say that, I don’t really talk about the stock price much,” Rosensweig said.
It’s been a difficult two years for Chegg investors. Since peaking at over $113 in February 2021, the stock has lost more than 90% of its value, pushing its market cap below $1.3 billion.
