Meta Platforms Inc (META US, NEUTRAL, TP US$200)
Comment: This new round of job cuts comes as no surprise with the company hinting that further cuts were to be expected during its 4Q22 earnings call. It is also in line with the company’s theme for the year – “Year of efficiency”, and should help to alleviate its declining margins. Operating margins were at 25% in FY22, down significantly from 40% in FY21.
Apple Inc (AAPL US, BUY, TP US$186)
Comment: Foxconn’s expansions for both the existing Chennai plant and the new plant in Bengaluru would have a combined output of ~40-50 million iPhones annually (20%-25% of the total). This is positive for Apple as it shows that its suppliers are willing to make new investments to maintain Apple’s business and help it build a more diversified, resilient supply chain.
Amazon Inc (AMZN US, ACCUMULATE, TP US$117)
Comment: The 9,000 figure represents about 0.6% of Amazon’s total number of employees or 2.6% of its corporate workforce. This brings the number of affected employees to 27,000 (~1.8% of the total as of 4Q22). Although the magnitude of cost reduction is yet to be seen, we still like the move as it shows that the company remains committed to cutting costs and improving margins. Based on our forecast and taking into account the latest round of layoffs, the average revenue-per-employee should improve by 11% YoY for FY23e, assuming that Amazon does not go through any more layoffs.
Netflix Inc (NFLX US, ACCUMULATE, TP US$388)
Comment: Streaming tailwinds continue to support the growing popularity of Netflix, with a clear trend of gaining market share on incumbents like cable TV or broadcast TV. We do expect this to continue moving forward as streaming companies consistently churn out high quality content for their users.
Alphabet Inc (GOOGL US, BUY, TP US$131)
Comment: We think that Generative AI applications like Bard could be a powerful tool for Alphabet users, especially in the areas of idea generation, and comprehension of complex topics. Integration of Bard with Alphabet’s regular search function could be on the cards soon, which could significantly bolster search and advertising performance.
Microsoft Corp. (MSFT US, BUY, TP US$298)
Comments: While Microsoft’s cloud business is growing rapidly as customers try to accelerate their digital transformation journey to save money, the company has been hit hard by currency fluctuations and weakness in the PC consumer market. For 3Q23e, Azure revenue growth is expected to further slow down (~30% YoY growth in 3Q23e vs. 49% in 3Q22) as large customers pause their spending amid the economic uncertainty. Meanwhile, Windows OEM revenue is expected to fall in the mid-to-high 30% range as the PC market continues to deteriorate.