Chegg downgraded to Underweight from Equal Weight at Morgan Stanley

Morgan Stanley downgraded Chegg (CHGG) to Underweight from Equal Weight with a price target of $1.25, down from $2. The firm says a “steep drop” in third party data trends suggest Chegg’s consensus estimates may prove to be too high. This creates a tough setup for a “secularly challenged stock” which is up over 20% off its 2024 lows, the analyst tells investors in a research note. Web traffic and app download data trends for Chegg weakened significantly in November and December, contends Morgan Stanley. It believes impacts from an intensifying generative artificial intelligence competitive landscape are “still to come” as those students with more history and allegiance to Chegg graduate.