The emergence of generative artificial intelligence software tools poses a major risk to providers on online courseware like
Chegg,
Coursera
and
Duolingo,
Goldman Sachs analyst Eric Sheridan said on Friday.
He cut his ratings on all three stocks to Sell from Neutral as part of a broader look at the outlook for small- and mid-cap internet stocks. All three stocks dropped in response.
In Friday trading, Coursera closed down 11%, Chegg was 2.2% lower, and Duolingo fell 2.6%. All three were well off their lows for the day as the
Nasdaq Composite
powered ahead with a gain of 1.7%
All three companies declined to comment.
For Chegg, AI isn’t a new concern. In 2023, the provider of online homework help, mainly for college students, said that it was seeing competition from free AI chatbots, and responded with plans to implement AI features in its own tools. But the stock fell 55% last year.
That contrasts with Duolingo, which provides app-based language-learning software. The company added new AI features to its software last year, winning a positive response from Wall Street. The stock more than tripled in 2023.
Coursera shares had a strong year as well. The provider of online professional training courses rallied 64%. In a year-end blog post, the company noted that it saw a surge in demand in 2023 from users for content related to AI.
“In all three stocks we see AI being a potential headwind in the coming years with potential offsets from operational efficiencies if AI content creation can drive productivity gains,” Sheridan wrote in a research note.
Long term, he said, it still isn’t clear how the companies will balance investments in computing and content licensing with savings on content creation.
Meanwhile, Sheridan also lifted his rating on
Fiverr
shares to Buy from Neutral, anticipating better times at the marketplace for freelance workers. “The company continues to position its platform and products for increased levels of personalization and matching capabilities, along with more complex projects, with many of those initiatives driven by AI,” he wrote. Fiverr shares were 5.3% higher.
In another move, Sheridan chopped his rating on
ZipRecruiter
to Neutral from Buy, saying risks and potential rewards are more balanced given that the stock has risen more than 20% since the company’s last earnings report. “We expect short-term headwinds (largely driven by the broader macro environment) to persist into 2024,” he wrote.
ZipRecruiter shares were down 0.2%.
Write to Eric J. Savitz at [email protected]
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