Chegg (CHGG) has announced a new round of layoffs, and according to its CEO, the rise of ChatGPT and Google’s (GOOGL) AI summaries are largely to blame. Yesterday, the digital education platform announced that it will be eliminating 319 employees, amounting to roughly 21% of its staff. This news is weighing heavily on share prices so far, as it calls Chegg’s future growth prospects into question.
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What’s Happening with Chegg Stock?
Since Chegg announced the layoffs, shares have been trending downward. CHGG stock closed out trading today down 11% and has continued declining in after-hours trading. After a week of only mild price action, Chegg plunged and is currently down 7% for the week. Based on its recent performance, a rebound is unlikely.
Layoffs are not always bad for a stock. In some cases, they can boost share prices if they indicate that the company is focused on strategic restructuring. But the Chegg job cuts don’t signal that at all. The Wall Street Journal reports that CEO Nathan Schultz deemed the layoffs necessary due to declining revenue caused by the rise of ChatGPT and Google’s AI summaries.
“The company, whose stock has fallen 99% since 2021, has already been impacted by students turning to ChatGPT and other AI chatbots rather than paying for study help from Chegg,” the Journal notes, highlighting the central problem facing Chegg. It is fighting an uphill battle against OpenAI and Google, two companies with vast resources and no incentive to slow down.
Wall Street Remains Sidelined on CHGG Stock
Few analysts follow Chegg but those that do are not optimistic about its growth prospects. Analysts have a Hold consensus rating on CHGG stock based on three Holds assigned in the past three months, as indicated by the graphic below. While shares have fallen 82% over the past year, there are not enough analyst ratings to determine an average price target for CHGG stock.
