Online Tutoring Company Stock Crashes as ChatGPT Steamrolls Its Competition
An online tutoring company that once dominated its industry is now facing a significant downfall, thanks to ChatGPT. The CEO of Chegg, the orange-branded e-tutoring company, admitted during an earnings call that the outlook for his company is less than sunny now that its stock is down more than 40%. As students' interest in ChatGPT continues to increase, Chegg is seeing a noticeable impact on its customer growth rate.
Chegg was founded in 2005 as a textbook rental site and went public a decade ago. Its value rose exponentially alongside its user base during COVID-19 lockdowns, when distance learning made the need for online tutoring more pronounced. In early 2021, Forbes put the company on its cover as its stock value more than tripled, and its valuation ballooned to more than $12 billion. However, the company's stock price fell to around $9 at the closing of the markets yesterday, which is notably less than the $12.50 it was valued at during its initial IPO in 2013.
It wasn't until March that Chegg saw a significant spike in student interest in ChatGPT, which has been accused of helping students cheat. This spike has led to a substantial impact on Chegg's new customer growth rate. Despite Chegg's announcement that it's developing its own AI, CheggMate, in partnership with OpenAI to help students with homework, analysts who spoke to CNBC note that it probably won't be enough to change its stock trajectory until next year.
In just a few short years, ChatGPT has become the apex predator in this situation, eating away at its predecessors. As both Chegg and ChatGPT are accused of helping students cheat, it's not exactly surprising that one may be overtaking the other.
In conclusion, the rise of ChatGPT has significantly impacted online tutoring companies, with Chegg's stock experiencing a significant decline. It remains to be seen how Chegg will navigate this situation, but concerns over student cheating have put the spotlight on both companies.
