Shares of two big online education stocks tank more than 10% as students use ChatGPT

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Chegg and Coursera both sank 14% in premarket trading Tuesday, a day after issuing disappointing guidance.

Both stocks sank by more than 10% on Tuesday after issuing disappointing guidance in part because of students using AI tools such as ChatGPT.

As a result, Jefferies downgraded the stock to underperform from hold and lowered its price target to $4 from $7, suggesting 2% downside from Monday's close."We question the ability of CHGG to return to durable growth as free AI tools become an attractive alternative to a paid CHGG sub," analyst Brent Thill wrote in a note Tuesday.Current CEO Daniel L.

Meanwhile, Coursera said it expects second-quarter revenues between $162 million and $166 million, below the $178 million consensus estimate, per LSEG. It also said it anticipated earnings before interest, taxes, depreciation, and amortization for the quarter to be between -$2 million and $2 million, versus the $5 million expected from analysts polled by StreetAccount.Coursera, too, is trying to use AI to its advantage.

 

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