Layoffs are coming to Meta and Apple cuts iPhone production Layoffs are coming to Meta and Apple cuts iPhone production Layoffs are coming to Meta and Apple cuts iPhone production

Layoffs are coming to Meta and Apple cuts iPhone production

PG
Peter Garnry

Head of Equity Strategy

Summary:  Meta did not do well with investors during and after the Q3 earnings release with large institutional investors concluding that Zuckerberg is not listening to investor concerns over its capital expenditure plans for next year and ballooning operating expenses. But the Wall Street Journal is writing that Meta is planning a large layoff to regain credibility with investors sending shares up 3% in pre-market trading. Apple is announcing a cut to iPhone production of 3 mn units as demand is declining due to inflationary pressures. Apple shares are down 1% in pre-market trading.


Is Mark Zuckerberg finally listening to investors?

Institutional investors were disappointed by Meta’s Q3 earnings but even more disappointed during the investor talks after the Q3 release as the key takeaway was that CEO Mark Zuckerberg is acting like a absolute monarch listening to no one. As result Meta’s slide continued last week below $100 and ending just above $90 on Friday. The Wall Street Journal reported yesterday that Meta is planning to lay off thousands of employees to send the signal to investors that it is serious about preserving profitability while maintaining its aggressive bet on the metaverse. Investors are reacting to this unconfirmed news sending the shares 3% higher in pre-market trading.

Zuckerberg is clearly getting to the conclusion that something has to happen with Meta’s share price down 76% from the peak and the 12-month P/E ratio plunging to around 10 which 40% below the S&P 500. If Meta can prove that it can stabilize operating income through layoffs while maintaining growth in its core business and show more promising progress on its metaverse bet, then the P/E ratio could recover back to the S&P 500 average. In this event, the stock has a 60% gain potential, but such a move is not risk-free for investors. The key risks for Meta is the competition from TikTok, lack of monetization of WhatsApp, higher energy costs running datacenters, cash compensation pressures due to employee stock options losing value, and institutional investors continuing selling their shares.

Meta share price | Source: Saxo

Apple’s services will shield the worst from hardware demand fall

Another US technology company in focus today is Apple announcing that it is cutting its iPhone production target by 3mn units which is roughly 1.5% of its annual volume. While this is a small figure it is still a big change for Apple that is used to see volume grow and the company has recently hiked prices on its services to offset the weakness in its hardware division. The Services segment has recently seen its gross profit decline for two straight quarters which is the first time for Apple and part of the explanation is higher energy costs running its datacenters. This explains the recent price hikes on its services such as TV streaming, music etc., and the move will help Apple to offset the downturn in hardware, and because its strong market position Apple is in a good place to preserve margins by hiking prices.

Apple share price | Source: Saxo
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.