The wave of layoffs at the tech giants continues. On Monday, Amazon (AMZN) announced another cull to the workforce, this time of around 9,000 employees – roughly 3% of the corporate headcount.
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The latest cuts come in the wake of a previous reduction to the workforce – January’s 18,000 job losses. Combined, it all amounts to the biggest layoff in the ecommerce giant’s history. This axing round should be completed during Q2 and will affect AWS, PXT, Advertising, and Twitch.
The decision to further prune the workforce is part of Amazon’s attempt to rein in costs as it comes to terms with the new economic reality. Investors were not impressed with this latest move but it’s hardly a shocker to Baird analyst Colin Sebastian, who recently pointed out Amazon could be one of the companies where further headcount reductions were possible.
The difference, though, in comparison to the previous cut is a “notable tone shift.” When, in 4Q22, the company set in motion the restructuring process, the workforce cuts mostly affected Devices & Books, PXT, and Stores, and management struck an optimistic tone regarding the prospects of AWS and Advertising. However, Sebastian notes that the latest announcement signaled a “tone shift, as reductions will now impact key growth segments, including AWS and Advertising.”
The company will keep on hiring strategically, specifically in areas to which more resources are being allocated. Sebastian thinks these could include Healthcare, Kuiper, and Grocery.
Nevertheless, the analyst thinks another round of layoffs is not out of the question. “Ultimately,” Sebastian summed up, “we are not surprised by management’s decision to make further reductions as the company is committed to delivering margin improvement, while still focusing on key business strengths and new areas of investment. Looking further ahead, we would not rule out further reductions as there is likely considerable efficiencies that could be unlocked across multiple business segments as AI and automation take form in the next few years.”
So, what does it all mean for investors? Sebastian reiterated an Outperform (i.e., Buy) rating, backed by a $125 price target. Should the figure be met, investors will be sitting on returns of 26% a year from now. (To watch Sebastian’s track record, click here)
Amazon receives plenty of attention on Wall Street, almost all of it positive; barring one skeptic, all 37 other recent reviews say Buy, naturally making the consensus view here a Strong Buy. Going by the $136.86 average target, the shares will appreciate by 38% over the coming months. (See Amazon stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
