Layoffs are becoming more common, especially in big tech. Elon Musk has been in the spotlight for laying people off at his companies, including laying off 80% of the Twitter staff. Despite the massive layoffs, X continues to run smoothly, and it seems as if other tech leaders paid attention.
Tech corporations previously known for offering dream jobs have been trimming their workforces. Job cuts have been helping these companies report higher profits while delivering top-line growth. Here are some stocks to buy after layoffs happen.
Alphabet (GOOG, GOOGL)
Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) have freed up more capital to pour into artificial intelligence efforts. It’s also resulted in higher profit margins and an attractive 27 P/E ratio. The first quarter highlighted those trends. Revenue increased by 15% year-over-year (YOY) while net income surged by 57% YOY.
The advertising giant’s financial strength prompted it to offer its first dividend. Shareholders will soon receive a quarterly dividend of $0.20 per share. The company is returning capital to its shareholders and should have the opportunity to maintain a double-digit compounded dividend growth rate for several years.
Stock market investors have been happy with the company’s returns. Even if you don’t own Alphabet stock, it’s probably in one of your mutual funds or ETFs. Shares are up 26% year-to-date and have more than tripled over the past five years. Advertising, cloud computing and artificial intelligence present compelling long-term opportunities for Alphabet.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is another tech darling that has been initiating many layoffs. The company cut its workforce more than any other tech company last year. Despite the layoffs, Amazon is doing well. Net sales increased by 13% YOY in Q1 2024. Net income more than tripled YOY as the company benefits from segments with higher profit margins.
The tech conglomerate got started with its online marketplace. This marketplace still makes up the majority of Amazon’s revenue. However, Amazon Web Services, streaming, advertising and groceries are gaining ground. Cloud computing and advertising in particular have high profit margins that have strengthened the firm’s balance sheet.
Amazon stock has been a top performer in the stock market. Shares are up 21% year-to-date and have roughly doubled over the past five years. Analysts rated the stock as a Strong Buy with the average price target projected a 20% upside from current levels.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) also did plenty of layoffs in 2023 as it focused more of its workforce and capital on artificial intelligence. Those layoffs haven’t intimidated analysts who still rate the stock as a Strong Buy. The average price target gives the stock a projected 16% upside.
The tech giant has been a steady performer in the stock market. Shares are up by 17% year-to-date and gained 232% over the past five years. The stock also offers a 0.71% yield and a double-digit dividend growth rate.
While the dividend is a nice bonus, most investors have been accumulating shares due to the corporation’s financials and competitive advantage. Microsoft operates in several high-growth industries and has continued to grow in most of those areas.
Cloud computing was the biggest area of strength. Revenue in Microsoft Cloud increased 23% YOY and represented more than half of the company’s total revenue. Overall revenue increased by 17% YOY in Q3 FY24. Net income growth was even better and came in 20% higher than during the same period last year.
On this date of publication, Marc Guberti held long positions in GOOG, AMZN and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
