Goldman Sachs downgrades Chegg, Duolingo, Coursera over AI
Goldman Sachs analysts have downgraded education resource companies Chegg (CHGG), Duolingo (DUOL), and Coursera (COUR) over AI concerns. Yahoo Finance's Akiko Fujita and Rachelle Akuffo take a closer look at analyst commentary on the stocks.
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Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
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- Let's take a look at some trending tickers that we are tracking in the education technology space. Take a look at those declines there. Chegg, Coursera, and Duolingo all down on the day. Coursera taking the biggest hit here, coming on the back of Goldman Sachs downgrading all three stocks to sell from neutral, citing AI as a potential headwind in the coming years for each company.
Rochelle, Goldman Sachs putting out a pretty hefty note here on that space today talking about a number of factors. It's not just all AI. We'll take them specifically here, but specifically on Chegg. I mean, Dan Rosensweig, the CEO, has warned of this. He warned of it last year in the spring, talking about ChatGPT and the adoption by students weighing on growth for the company moving forward. That's flagged here in the Goldman note.
On Coursera, specifically, Goldman lowering its price target to $14 from $18. You talk about weaker enterprise revenues. They're not necessarily related to AI there, but Coursera taking a big hit today on the back of this. And then Duolingo being downgraded to sell from neutral, although Goldman maintaining that $160 price target on the stock.
- It's true. I mean, when you look at where the valuations already were for small and mid caps, I mean, it does make sense in the context. We knew that AI was going to start taking some of the lunch of some of these programs. Obviously, they all do different things. Duolingo when it comes to languages. But now you have AI now becoming part of people's cell phones and generative AI, and some of these conversations you can have, they really do take your Duolingos out of play here.
And when it comes to online learning, it's really expanded-- a lot of people not looking necessarily for the traditional college route either, especially when you think of student loan debt. That doesn't seem as appealing. So people are looking for some alternatives here but still able to find some cheaper options here. And it does mean it does make that pie a little bit smaller as you see AI chipping away and some of these other more attractive companies with better valuations also taking place.
- Yeah, I mean, you could argue it's still early days to see how this is really going to disrupt the ed-tech space. You look at somebody like Duolingo. They've integrated ChatGPT into the learning experience. So they've talked about that integration before. The company has pushed it as a plus for more engagement within that learning experience, but interesting to see how these stocks have really declined.
I mean, a name like Coursera, you'll recall they saw huge gains during the pandemic. This is one of those other names where when people are stuck at home, they did have these huge partnerships with universities across the world to try and push for online learning. Maybe a bit of a pullback coming on the back of that, as well as is this return back to classes affecting Coursera, too. So we'll continue to watch that space. All three stocks down significantly on the day.
