ChatGPT Weighs on Chegg (NYSE:CHGG); What's Ahead ...
The adoption of OpenAI's ChatGPT affected Chegg's new account growth, leading to a 38% drop in CHGG stock. Despite this, Chegg's CEO, Dan Rosensweig, mentioned that the company had been experiencing strong retention rates and expects a positive recovery in enrollment trends in the near future.
Chegg has prioritized the use of AI in its services and recently introduced CheggMate in collaboration with OpenAI. CheggMate employs the power of ChatGPT and the company's proprietary data to provide a unique learning tool for its users. With CheggMate, the company hopes to expand its addressable market, reduce content costs, and strengthen its user relationships.
Chegg's Q1 performance saw its total revenues decrease by 7% year-over-year, with subscription service revenues falling by 3%. The company reported adjusted earnings of $0.27 per share, outperforming the analyst consensus estimate of $0.26 per share. However, Q2 guidance was lower than expected, leading Goldman Sachs analyst Eric Sheridan to cut CHGG's price target and maintain a Hold recommendation.
Despite the near-term challenges from ChatGPT, analysts are cautiously optimistic about CHGG stock, with four Buy and eight Hold recommendations translating into a Moderate Buy consensus rating. The analysts' average price target of $21.11 implies a 19.94% upside potential from current levels.
Overall, while CHGG's AI initiatives have yet to prove their effectiveness, the company's emphasis on incorporating AI into its services shows promise for future growth.
