- Chegg's customer growth rate hindered by ChatGPT's growing popularity among students
- Projected revenue falls short: $175-$178 million versus expected $193.6 million
- CheggMate, an AI homework helper, in development—but its impact remains uncertain
Chegg, a popular online education platform, just took a massive hit. How? ChatGPT's entrance into the academic scene. Chegg's CEO, Dan Rosensweig, spilled the tea during an earnings call, revealing that ChatGPT's growing popularity among students is putting a dent in their customer growth rate. At first, everything was smooth sailing, but since March, the ChatGPT tidal wave has been too powerful to ignore.
Get this: Chegg offers homework help and online tutoring, but their projected revenue for the quarter is looking pretty bleak. Analysts expected a cool $193.6 million, but Chegg is forecasting a mere $175 to $178 million. Ouch. Tuesday trading saw Chegg's shares take a nosedive, plummeting 48% to just $9.01.
But hey, it's not all doom and gloom. Chegg managed to outperform first-quarter expectations with 27 cents earnings per share (excluding items), just above the 26 cent estimate. Plus, their $188 million revenue beats the predicted $185 million. Still, Morgan Stanley's Josh Baer wasn't impressed, as he slashed his price target from $18 to $12, citing the AI's impact as the major buzzkill.
To level the playing field, Chegg's developing its own AI buddy: CheggMate. In a twist of fate, they're teaming up with OpenAI (the very creators of ChatGPT) to bring this homework helper to life. But Jefferies analyst Brent Thill isn't holding his breath, with doubts about CheggMate's potential impact in the near future.
Thill says the beta version of CheggMate will drop this month, but the full launch remains shrouded in mystery. It's a waiting game for CheggMate's influence, and Thill predicts we won't see any major shifts until at least FY24.
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