Chegg stock gets rocked as execs downplay AI attack led by ChatGPT

Freakishly smart AI such as ChatGPT will not pummel education platform Chegg (CHGG) as Wall Street has increasingly grown concerned about, the company’s top execs argue.

“No. Nothing at all that is noticeable,” Chegg CEO Dan Rosensweig told analysts on a late Monday earnings call when asked if there had been an early impact from ChatGPT’s explosion onto the learning scene. “And obviously, we’re going to track it, but we’ve seen nothing. We’ve seen continued really powerful renewals and reduction and cancellations, we’ve seen continued high take rates of Chegg Study Pack.”

In fact, the long-time tech exec thinks Chegg could partner with a platform like ChatGPT to help power its platform.

“So, it’s going to be an API-based business, where we will be participating and using it to enhance our product and we think it’s going to be a big opportunity to say you can get everything from them plus what you get from us, plus all the expansion,” Rosensweig said.

Despite the pushback on AI’s long reach into higher learner, Chegg’s stock still got rocked as investors put fresh emphasis on the performance of a business trying to rally back from the COVID-19 pandemic.

Shares of Chegg plunged more than 20% in early Tuesday trading following a back-end weighted, below-consensus 2023 outlook.

Here is how Chegg performed compared to Wall Street estimates:

4Q22 Results

2023 Guidance

Chegg pinned the shortfall on students continuing to wade slowly back into the education market from the depths of the pandemic, while others fine-tune their approach to the learning process.

“We have a large hole to dig out of, but as you see it from the way the seasonality works as we dig out of it, we exit the year and [see] substantially higher growth and go into 2024 with an expectation of return to double-digit growth,” Rosensweig said of the company’s outlook.

UKRAINE - 2021/08/07: In this photo illustration a Chegg, Inc. logo of an US education technology company is seen on a smartphone and a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

UKRAINE – 2021/08/07: In this photo illustration a Chegg, Inc. logo of an US education technology company is seen on a smartphone and a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

Analysts are mixed on Chegg’s stock at this point.

“A soft guide despite a normalizing education environment will bring questions as to if this is a Chegg-specific issue or an education tech issue,” wrote Jefferies analyst Brent Thill in a client note.

Thill maintained a buy rating on Chegg, nonetheless.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Source: https://finance.yahoo.com/news/chegg-stock-earnings-ai-chatgpt-sales-outlook-144915215.html