I’m Yang. 12, alphabet (Nasdaq:googNasdaq:Google) announced the first major layoffs of the year. However, news of the layoffs did not elicit much reaction among GOOG stock traders. The stock has barely moved since the announcement.
However, given the limited nature of this firing round, this is not surprising. The company has yet to announce across-the-board job cuts, as he cut just a few hundred jobs at two of its Other Bet ventures. So it’s akin to layoffs announced by other companies in the industry. Amazon (Nasdaq:AMZN) When meta platform (Nasdaq:meta).
To renew investor enthusiasm, Google When Youtube Parent companies will need to follow suit and pursue other cost-cutting initiatives.
Still, layoffs alone may not fix all the problems with this hard-hit FAANG component. There is another big concern that, if left unaddressed, could continue to adversely affect the long-term outlook for stocks.
GOOG stock and latest job cut news
As reported by wall street journalThe layoff plan Alphabet announced last week consisted of 200 job cuts. Trulythe umbrella entity holding Alphabet’s healthcare-related “other bets,” along with the 40-employee reduction Specificone of the company’s robotics-related “other bets.”
As mentioned above, the news did not have a significant impact on GOOG stock. Considering Amazon’s recently announced layoffs of his 18,000 and Meta’s layoffs of more than 11,000, Alphabet’s latest layoff announcement will have little impact on future earnings results.
Current economic challenges may continue to affect our operating results throughout the year. Things could improve by 2024, but unless growth accelerates again to pandemic-era levels (which seems unlikely), a rebound in earnings next year could push stocks back to their past highs. , may not be enough to push it to new highs.
That said, if Alphabet suddenly announces a drastic cost-cutting plan, don’t assume it’s following recommendations. TCI Fund Management The recovery is in full shape after being delivered to CEO Sundar Pichai last fall.
Another factor may offset cost reduction gains
There’s no guarantee that the aforementioned layoff news will be the only GOOG stock restructuring news in the near future. Alphabet may make further cuts to its “other betting” business. Announcements of layoffs in the five-figure range could still be forthcoming for core businesses.
However, even if Alphabet begins implementing significant cost reductions, the impact on GOOG’s long-term results may be limited. Profitability gains from reduced headcount and reduced employee benefits are likely to outweigh the impact of another factor, increased competitive risk.
competition with Amazon microsoft (Nasdaq:MSFTMore) could limit the ability of Google’s cloud computing segment to contribute significantly to the bottom line.further rise in tick tock It may continue to be a burden on YouTube. It’s already impacting YouTube’s growth and could eventually put pressure on the platform’s profit margins.
Most concerning, however, is the potential long-term threat to Alphabet’s core business unit, the Google search segment.
As we talked about recently, Microsoft and Open AI (ChatGPT developers) could empty Google’s deep moat. In other words, it puts pressure on industry-leading margins and reduces profitability.
Simply put, two events must occur before Alphabet’s “story” can truly change. The layoffs in some of the aforementioned ‘other betting’ segments are a step in the right direction, but management should follow the lead of rivals and start optimizing operating costs.
In parallel, Alphabet’s management must implement concrete plans to maintain its dominance in search advertising, as well as the competitive challenges experienced by the cloud and video segments. must be dealt with.
Until this happens, stocks will likely continue to underperform and trade flat in the short term, only recovering slightly and partially when the broader equity market begins to recover. With this in mind, there’s still little reason to dive into GOOG stocks today.
GOOG Stock Receives D Rating portfolio grade.
On publication date, Louis Navellier held AMZN, GOOG, and MSFT. Louis Navellier did not hold any other positions (directly or indirectly) in the securities referred to in this article.
The InvestorPlace research staff member primarily responsible for this article did not hold (directly or indirectly) any positions in the securities referenced in this article.