What Happened?

Shares of online study and academic help platform Chegg (NYSE: CHGG) jumped 7.8% in the morning session after positive sentiment grew around the company's strategic shift toward artificial intelligence. 

The education technology company benefited from heightened demand for AI-driven and personalized learning solutions. In a key move, Chegg repositioned its main product, Chegg Study, into an AI-powered Personalized Learning Assistant. This strategic change aimed to tap into the growing market for adaptive learning in higher education and adult learning programs.

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What Is The Market Telling Us

Chegg’s shares are extremely volatile and have had 102 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 1 day ago when the stock dropped 3.3% on the news that it extended losses as it agreed to pay a $7.5 million settlement over Federal Trade Commission (FTC) allegations. 

The stock's drop continued a slide from the previous day, when shares sank over 7% as the news first broke. The FTC claimed that the online learning platform made it unnecessarily difficult for consumers to cancel their auto-renewing subscriptions. 

According to the complaint, Chegg's cancellation process was buried on its websites and presented a confusing and cumbersome process for users. Furthermore, the FTC alleged that the company had continued to charge nearly 200,000 customers since October 2020 even after they requested to cancel. This settlement adds to existing concerns about the company's performance, as it also faced intense competition that led to a 17.3% annual drop in its services subscribers.

Chegg is down 8.3% since the beginning of the year, and at $1.54 per share, it is trading 41.8% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $24.04.

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