Chegg Stock Crashes on ChatGPT Competition

CHGG was downgraded after the company's earnings

Deputy Editor
May 2, 2023 at 10:49 AM
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The shares of Chegg Inc (NYSE:CHGG) are plummeting today, down 46.3% at $9.43 at last glance -- earlier hitting a six-year low of $8.93. Though the company posted better-than-expected first-quarter results, its revenue warning sent the stock reeling, after the "study-help" name admitted that ChatGPT is posing a threat. CEO Dan Rosensweig noted significant student interest in the artificial intelligence (AI) chatbot since March, and "now believe it’s having an impact on our new customer growth rate.”

Following the news, Jefferies downgraded CHGG to "hold" from "buy," while both Northland and Barrington slashed their ratings to "market perform" from "outperform." No fewer than three other analysts threw in price-target cuts as well. Now, only two of the 17 analysts in coverage carry a "buy" or better rating. 

Option bulls can't be pleased with today's development, as 3.96 calls have been bought for every put in the last 10 weeks at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 93% of readings from the past year, showing an unusually high penchant for calls. 

Year-to-date, Chegg stock is now down 63.2%, and prior to today's post-earnings bear gap, had encountered chart resistance at its 80-day moving average.

 

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