Morgan Stanley cuts Chegg stock to underweight amid pressures from AI

Investing.com -- Morgan Stanley downgraded Chegg Inc (NYSE: CHGG) to "Underweight" on deteriorating third-party data trends and a challenging competitive environment.

The brokerage set a price target of $1.25, reflecting concerns about declining revenue and margins.

Web traffic and app downloads weakened in November and December, while Chegg’s subscriber trends continued to underperfom historical seasonality throughout 2024.

Morgan Stanley (NYSE: MS) expects intensifying competition from AI-driven content to further erode Chegg’s market position as students migrate away.

The firm’s 2025 and 2026 revenue and EBITDA estimates are 12%-24% and 31%-57% below consensus, highlighting a potential overvaluation for the stock, which has rallied over 20% since November lows. Morgan Stanley forecasts negative revenue growth and sees the market underpricing demand risks.

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