Online learning platform Chegg (NYSE:CHGG) has slashed about 4% (about 80 employees) of its global workforce, as the company is reorganizing its business due to the growing threat from Microsoft (NASDAQ:MSFT)-backed OpenAI’s ChatGPT. The company expects to incur charges in the range of $5 million to $6 million in connection with its reorganization efforts, with most charges to be incurred in the second quarter.
Chegg’s Reorganization Efforts
The move comes as Chegg is streamlining its structure to execute its artificial intelligence (AI) strategy. In a letter to the employees, CEO Daniel Rosensweig said that the entire company was reorganized in less than 90 days.
The company aims to attract students to its AI-powered CheggMate automated tutor interface. In the letter, the CEO added that the company expects hundreds of people working directly on CheggMate by the end of 2023 and anticipates the number to grow.
Chegg stock plunged 48% on a single day last month when the company acknowledged the impact of ChatGPT during the Q1 earnings call. In particular, CEO Rosensweig said that the company saw a significant spike in student interest in ChatGPT. He confirmed that ChatGPT is impacting Chegg’s new customer growth.
Is Chegg a Good Stock to Invest In?
Last month, Bank of America analyst David Amiras lowered the price target for Chegg stock to $11 from $20 and maintained a Hold rating. The analyst cautioned that near-term recovery in the shares following the Q1 earnings call seems to be “an unlikely prospect.”
All the seven top Wall Street analysts covering Chegg have a Hold rating on the stock. The average price target of $13.75 implies nearly 26% upside. Shares have tanked about 57% since the start of 2013.