Once a darling of the education technology sector, Chegg is now facing an uncertain future as it grapples with the implications of AI and the rise of free AI-powered learning tools like ChatGPT. The company’s delayed and ineffective response to the AI revolution has resulted in a dramatic decline in its market value, leaving investors wondering if Chegg can regain its former glory.
Chegg’s initial hesitancy to embrace AI and the subsequent rushed implementation of its AI-powered assistant, CheggMate, have failed to differentiate the company’s offerings from the plethora of free and more advanced AI-driven solutions available to students.
Compounding Chegg’s challenges are its declining revenue and rising expenses, a trend that is expected to continue in the coming years. Financial analysis using a discounted cash flow (DCF) model suggests that Chegg’s current share price is slightly overvalued, indicating that the market may be pricing in some optimism that the company can turn things around.
However, the company’s inability to demonstrate how it will remain relevant in a rapidly changing market, coupled with its lackluster AI implementation, suggests that the company’s struggles are likely to continue. Investors who believe that Chegg can successfully navigate the AI landscape and adapt its offerings to meet the evolving needs of students may consider holding on to their shares. However, given the company’s current trajectory and the increasing competition in the AI-driven education market, selling Chegg stock may be a more prudent decision.
