What Happened?
Shares of online study and academic help platform Chegg (NYSE: CHGG) fell 4.9% in the afternoon session after continued concerns about the competitive threat posed by Artificial Intelligence (AI).
The education technology company is considered vulnerable as its core business model is directly challenged by the rise of generative AI platforms like ChatGPT. A recent market analysis highlighted that companies with business models easily undermined by AI are at risk of becoming obsolete if they are slow to adapt. Chegg was specifically mentioned as an example of a firm whose value proposition has been questioned due to AI's capabilities, a factor that has previously caused its stock to plummet. The persistent threat from AI automating complex tasks continues to weigh on investor sentiment regarding the company's future growth prospects.
The shares closed the day at $1.54, down 4.1% from previous close.
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What Is The Market Telling Us
Chegg’s shares are extremely volatile and have had 99 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 10.5% after a bearish consensus view from Wall Street analysts weighed on investor sentiment. The negative outlook is based on a consensus from 5 analysts covering the stock, who have collectively issued a "Sell" rating. Their average price target is set at $1.70, forecasting a potential 0.58% decrease in the stock's price over the next year. This general view from analysts suggests they believe the stock is likely to underperform the broader market, which appears to be pressuring the shares.
Chegg is down 8.3% since the beginning of the year, and at $1.54 per share, it is trading 41.9% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $23.33.
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