(Bloomberg) -- Shares of online-education firm Chegg Inc. were on track for their biggest drop in about a year as competition from AI tools led Wall Street analysts to downgrade the stock.

Jefferies analyst Brent Thill wrote in a note to clients that the company is “spiraling with no stability in sight.” He cut Chegg’s shares to underperform, from hold, and questioned whether the company can build “an AI experience that is meaningfully better” than what students can get for free. The shift came after the firm’s results Monday, which included a revenue forecast that was below consensus.

The stock was down almost 30% after midday in New York on Tuesday, which would be the most since May 2023, and was poised for the lowest close since 2016. Peer Coursera Inc. tumbled as well. The declines showed that while artificial intelligence has been a boon to companies like Nvidia Corp., for others it poses a threat.

“We find it difficult to believe that fundamental momentum will return to the business,” Thill wrote. 

At Craig-Hallum, meanwhile, analyst Alex Fuhrman also cut his recommendation on the company, to hold from buy.

Chegg, which offers online homework-help services, on Monday forecast net revenue of $159 million to $161 million in the second quarter, while the average estimate of analysts surveyed by Bloomberg was $174 million. It also announced that Chief Operating Officer Nathan Schultz will take over as chief executive officer on June 1.

In prepared remarks Monday for the company’s earnings call, current CEO Dan Rosensweig said the firm is “seeing encouraging signs of how our new AI enabled platform will serve more students.” Chegg has embraced AI, although the transition will take time, he said.

Chegg’s shares were down 37% year-to-date as of Monday’s close. They were battered last year as well, losing nearly half their value in one day in May after the company said OpenAI’s ChatGPT threatened the growth of its homework-help services. 

Chegg, based in Santa Clara, California, has trained its own large language models with “proprietary data and question/answer sets,” which it believes are more accurate than alternatives, the analysts noted. But “the AI wave presents a truly credible free product experience” as an alternative to Chegg’s paid subscriptions, they wrote. 

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