Apple (AAPL) has joined other tech giants in going slow on new hires and spending plans. Citing people with knowledge of the matter, Bloomberg reports that the tech giant intends to slow hiring in some divisions amid growing concerns about an economic downturn.
Apple Puts a Lid on Hiring and Spending
The push to slow spending is clearly not becoming a company-wide policy, as the company will continue to allocate money to research and development (R&D), as it does every year. Moreover, the changes will not affect all the teams as Apple is working on an aggressive product launch schedule next year.
According to Bloomberg, the tech giant is allocating lower-than-expected budgets for some of the teams for 2023 as part of the new changes. Last year, Apple’s capital expenditure increased 52% year-over-year to $11 billion. It also increased its spending on R&D by 17% to $22 billion.
While the company tends to increase hires by 5% to 10% in a given year, it won’t increase its headcount in 2023. Apple was forced to make similar drastic efforts in 2019, putting a lid on hires after iPhone sales missed expectations.
Apple has been one of the best-performing companies amid the upheavals led by the COVID-19 pandemic. It has topped Wall Street projections over the years and weathered economic turmoil much better than other companies. However, its stock has been under pressure recently and is down 17% year-to-date.
The U.S. Tech Industry is on a Job Cut Spree
The sell-off has coincided with the broader market pullback, with tech companies the most affected. In this context, Apple has joined Alphabet (GOOGL) which has also decelerated hiring. Amazon (AMZN) and Meta Platforms (META) are also going slow on new hires in response to the economic turmoil. The tech giants have reined in their budgets and decelerated hiring.
Microsoft (MSFT) says it is eliminating some of the positions as part of the reorganization. The reduction will affect less than 1% of its 180,000-person workforce. According to people with knowledge of the matter, Tesla (TSLA) has already laid off hundreds of workers and shuttered its California facility that was working on Autopilot self-driving technology. Chief Executive Officer Elon Musk says the layoffs are essential given the unstable economic environment.
Wall Street’s Take
The Street is bullish about the stock, with a Strong Buy consensus rating, based on 22 Buys and six Holds. The average AAPL price target of $183.05 implies 24.46% upside potential from current levels.
TipRanks data shows that financial bloggers’ opinions are 86% Bullish on AAPL, compared to a sector average of 64%.
Key Takeaway for Investors
Apple’s putting a lid on hires and spending is not expected to affect new product launches. Instead, it should help the company weather the storm and protect margins amid the economic slowdown worldwide.
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