AI Impact on Online Education Stocks: Chegg and Coursera Plunge After Disappointing Guidance

Artificial intelligence is reportedly impacting shares of online education companies Chegg and Coursera negatively. Both stocks fell by over 10% on Tuesday after issuing disappointing guidance, partly due to students using AI tools such as ChatGPT. Chegg’s revenue in the second quarter is projected at $159 million-$161 million against an anticipated $174 million forecasted by analysts polled by LSEG, causing Jefferies downgrade its stock from hold to underperform and lowering its price target to $4 from $7. The research company’s chief executive Daniel Rosensweig claimed that the proliferation of AI in education is a transformative moment for Chegg but analyst Brent Thill expressed concerns about users paying for AI when it can be obtained free elsewhere, as competitors may provide credible alternatives to paid subscriptions. Coursera also forecasted lower-than-expected revenues and earnings before interest, taxes, depreciation, and amortization in the second quarter against analysts’ predictions from StreetAccount. Despite mostly positive sentiments towards both stocks by Wall Street firms, some reduced their price targets for Coursera following dissimilar projections to a proposed revenue upsurge of self-serve students that it anticipates will provide an uplift alongside international self-help (e.g., local payments) but may encounter investor resistance due to the guidance’s second half acceleration until gaining more visibility.