Chegg Stock Surges on Analyst Upgrade, Faces Challenges from AI Competitors

Chegg (CHGG 11.07%) stock is seeing a significant rise in trading today, with the company’s share price up by 12.8% as of 11:30 a.m. ET. This surge comes following a research note from Morgan Stanley analyst Josh Baer, who upgraded Chegg’s rating from underweight to equal weight. Despite this positive shift, the stock is still down approximately 68% year to date. The latest developments show that while Chegg may be experiencing gains in the short term, it continues to face challenges in a rapidly evolving market.

Even though the company’s share price is up today, Baer actually lowered his one-year price target on Chegg from $6.50 per share to $3.25 per share. This new target implies a downside of roughly 11% based on the current trading price of $3.65 per share. Morgan Stanley’s lead analyst highlighted Chegg’s valuation profile and free-cash-flow generation as reasons behind the change in rating. Additionally, the disruptive impact of AI chatbots like OpenAI’s ChatGPT and Microsoft’s Copilot has posed challenges to Chegg’s core business of providing study and coursework tools for students.

Chegg faces the task of evolving and innovating to stay relevant in a market increasingly shaped by artificial intelligence. While the company is making efforts to integrate AI-driven technology into its platform, uncertainties remain regarding its ability to adapt successfully. Investors are closely watching Chegg’s strategic moves and technological advancements as the company navigates a changing landscape in the education services sector.