Students around the world have been playing on easy mode for the past 6-12 months as ChatGPT has become their go-to source for homework, and specifically, essays. And, the company that used to be the students’ trusted companion – Chegg (CHGG) is getting crushed as a result.
The online education company had its earnings call Monday night – and this morning, shares have fallen more than 48% as a result. CEO Dan Rosensweig says that while the year started solidly with no obvious impact from ChatGPT, that has not been the case since March.
In the past 60 days or so, student interest in ChatGPT has skyrocketed. In turn, the new customer growth rate at Chegg has fallen in correlation.
With that said, the earnings for the first quarter still came out on top of the consensus. The company reported revenue of $188 million, which was north of the $185 million analyst target. Moreover, the company narrowly beat the EPS outlook of 26 cents with 27 cents.
In the quarter ahead, though, the company is expecting to report revenue far below analyst expectations of $193.6 million – instead, shooting for somewhere between $175 million and $178 million.
While Chegg is in the process of developing its own AI – with the help of open AI – the product is a ways from finished. And, the impact is uncertain. As a result of all this, numerous analysts downgraded their ratings on Chegg.
Now, as an investor, you’re probably wondering if it’s time to cut losses with CHGG after the dire outlook for the road ahead. We’ve got 3 things you need to see through the VectorVest stock analysis system to help you make your next move with complete confidence.
Despite Good Upside Potential, CHGG Has Poor Safety & Very Poor Timing
With just 3 simple ratings, the VectorVest system tells you everything you need to know to consistently execute profitable trades. These ratings are relative value (RV), relative safety (RS), and relative timing (RT).
Each of these sits on a scale of 0.00-2.00, with 1.00 being the average. This makes interpretation quick and easy – just pick stocks with higher ratings to win more trades with less work!
Or, better yet, follow the clear buy, sell, or hold recommendations VectorVest offers based on these ratings for any given stock, at any given time. As for CHGG, here’s what you need to know:
- Good Upside Potential: The one thing CHGG has going for it right now is a good RV rating of 1.17, which is a comparison of the stock’s long-term price appreciation potential alongside AAA corporate bond rates and risk. The stock is undervalued right now, with a current value of $13.
- Poor Safety: In terms of risk, CHGG has poor safety – as evidenced by the RS rating of 0.83. This is calculated from a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Very Poor Timing: The biggest issue for CHGG right now is the negative price trend which formed today – resulting in a very poor RT rating of 0.13. This is based on the direction, dynamic, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
All things considered, the overall VST rating of 0.79 is poor for CHGG. So, does that mean it’s time to consider cutting losses? Or, is there any reason to hold onto hope for this stock? You’re not going to want to miss this recommendation – get a clear answer on your next move with a free stock analysis at VectorVest.
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VectorVest advocates buying safe, undervalued stocks, rising in price. And after last night’s earning call for CHGG, the stock has good upside potential – but poor safety and very poor timing.
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