Chegg, Inc. CHGG shares have plummeted nearly 60% over the past year, and a
recently released report by Edwin Dorsey’s “The Bear Cave” is sounding the
death knell for the company. Leveraging AI-powered homework aids could spell further trouble for the
embattled company.
What Happened: The pandemic-induced shift to digital learning and
online classes caused a surge in Chegg’s popularity, with the service boasting 8.2 million subscribers in
2022.
However, the emergence of AI-powered homework solutions has posed a grave challenge to
Chegg’s paid-subscription business model. Dorsey’s assertion that this could lead to the company’s
downfall has sent shockwaves through the industry.
“In short, The Bear Cave concludes that Chegg is a billion-dollar company headed to
zero,” wrote Dorsey, painting a grim picture of the company’s future prospects.
Chegg did not immediately respond to Benzinga’s request for comment.
AI-Powered Competitors: Chegg’s CEO Dan Rosensweig acknowledged
the challenges posed by the rise of ChatGPT and other AI-powered competitors during the company’s 2023
third-quarter earnings call.
“It has been nearly a year since ChatGPT launched. We have all learned a lot and are
experiencing how AI is impacting our lives. We know that students are using ChatGPT but what is
interesting is that they are using it for a variety of things in addition to education.”
Chegg also began integrating generative-AI features into its user interface, as noted in
Dorsey’s report, citing comments from Chegg CFO Andrew Brown at the May 18, 2023 Needham Technology &
Media Conference.
“I will tell you, we have absolutely pivoted internally to focus our resources on CheggMate
[the company’s fledgling AI chatbot] and AI. There is no doubt. We believe this is an existential change,”
said Brown, revealing the company’s strategic shift.
Related News: Don’t Worry About Short-Term Headwinds, Apple Is Positioned For Long-Term
Success, Analyst Says
Billing Complaints: In addition to the challenges posed by AI-powered
homework helpers, Dorsey also highlighted Chegg’s cancellation process, which he said has led to user
frustration and negative reviews. SiteJabber’s average rating of 1.36 out of 5 stars for Chegg and the
plethora of one-star reviews, alluding to billing and cancellation-related complaints, emphasize the
company’s customer retention issues.
CHGG Price Action: As of the time of publication, Chegg shares are trading
up 1.54% at $10.85, according to data from Benzinga Pro.
Image: Gerd Altmann from Pixabay
