Chegg shares recovered 17% after the loss on ChatGPT issues

May 4, 2023: On Wednesday, Chegg’s stock returned to the plus side after the online education firm lost half its worth a day earlier because of concerns regarding the potential impact of ChatGPT on its firm.

As of afternoon, New York time, Chegg shares were increased 17% to $10.63. But that’s still way below Monday’s closing costs of $17.60.

CEO Dan Rosensweig said after the market close that the stock’s plunge in regular trading hours was “extraordinarily overblown.” The shares had plummeted after Chegg’s earnings report on Monday when the company opted not to give yearly guidance because of uncertainty surrounding OpenAI’s ChatGPT, the famous artificial intelligence inbox.

While revenue in the initial quarter topped shows, Rosensweig warned on the call with people that ChatGPT was “affecting our recent customer growth rate.”

This month, Chegg is slated to launch CheggMate, its GPT-4 powered AI platform. Rosensweig stated that the combination of GPT and Chegg’s trove of academic information could be transformative. Still, it needs to be clarified what the uptake will be and how it will monetize.

Analysts at Piper Sandler, who has the equivalent of a hold rating on the stock, stated in a report that there are huge questions surrounding the pricing model, AI-connected expenses and whether improvement in AI “democratize their core providing to the extent that their competitive limits are down.” The firm slashed its price goals on the stock to $11 from $17.

Rosensweig reminded investors that Chegg generates free cash flow and returns on an adjusted basis and has “over enough cash to pay off our loans.”

“I think this is extraordinarily overblown, and I don’t generally say that I don’t talk regarding the stock price much,” Rosensweig stated.

It’s been a hard two years for Chegg investors. Since looking at over $113 in February 2021, the stock has lost over 90% of its value, pushing its market cap to less than $1.3 billion.