Chegg Needs To 'Dance In The Rain Without Getting Wet': 4 Analysts On Q1 Print

Shares of Chegg Inc CHGG crashed in early trading on Tuesday, after the company said its business was hurt by ChatGPT.

Piper Sandler On Chegg

Analyst Arvind Ramnani reiterated a Neutral rating, while reducing the price target from $17 to $11.

“CHGG reported modest upside to muted 1Q expectations,” Ramnani said in a note. The company withdrew its annual guidance, citing lower visibility due to advancements in AI technology, he added.

“Chegg has to make significant changes in a rapidly changing environment that is akin to “dancing in the rain without getting wet”,” the analyst wrote.

KeyBanc Capital Markets On Chegg

Analyst Jason Celino maintained a Sector Weight rating on the stock.

“Chegg admitted to seeing material growth headwinds from the competitive threat of ChatGPT, particularly from the GPT-4 update released on March 13th,” Celino wrote in a note.

Chegg’s AI-powered chatbot, CheggMate, is still in beta and there are several unknowns, including monetization and potential adoption, the analyst stated. Until there are answers, “we believe the competitive threat of ChatGPT remains a headwind,” he added.

Check out other analyst stock ratings.

Needham Morgan Stanley On Chegg

Analyst Ryan MacDonald reaffirmed a Hold rating on the stock.

“While the company outperformed on revenue and profitability in the quarter, ChatGPT has begun to impact new subscriber adds, reducing visibility, which led management to pull its previously issued FY23 guidance,” MacDonald said in a note.

Chegg has not given a timeline for the general availability of CheggMate, the analyst stated. The roll-out of this chatbot could be “a key near term catalyst for the story,” he added.

Raymond James On Chegg

Analyst Brian Peterson reiterated a Market Perform rating on the stock.

The company’s second-quarter growth guidance came in 9% below the consensus estimates, Peterson said.

“While the company has reallocated investments to focus on AI initiatives (particularly CheggMate), we note both the near and long-term ramifications of this shift remain unknown,” he added.

CHGG Price Action: Shares of Chegg had tanked by 49% to $8.96 at the time of publishing Tuesday.