Posted on 11/28/2022 5:40:02 AM PST by Red Badger
Google could be facing more calls from activist investors urging CEO Sundar Pichai and team to cut its OpEx base further, given slowing growth.
However, we discuss why Google has been relatively consistent with its OpEx spending over time. Moreover, its OpEx margins have also been trending down, unlike Meta Platforms.
Notwithstanding, Google needs to reaccelerate its top line growth to justify a material re-rating. We discuss why the market has likely reflected significant uncertainties in its execution due to substantial macro and competitive headwinds.
Maintain Buy.
Thesis
Google (NASDAQ:GOOG, NASDAQ:GOOGL) employees have been anxious over the past month after seeing Meta Platforms (META) and Amazon (AMZN) implementing significant layoffs to reduce their cost base.
Activist investor TCI Fund Management leveraged the momentum from the recent tech layoffs calling on Google's management to slash its cost base to lift its operating leverage.
While Google indicated in its Q3 earnings commentary that it would channel its resources on its most important priorities, it had yet to suggest that slashing headcount was an immediate priority.
Notwithstanding, The Information reported recently that Google had revised its performance management system, potentially placing 6% of its employees into the "low-performance" zone. Hence, Google's adjustment suggests that some headcount reduction could occur in 2023.
Furthermore, Google Cloud has also reportedly tweaked its commission model for its sales teams. Accordingly, its revisions could align Google Cloud's compensation model closer to its hyperscaler peers by focusing on consumption rather than deal value. While it could help reduce its remuneration costs, the impact on its competitiveness is uncertain.
Therefore, we don't believe Google has been standing still while its tech peers moving aggressively to slash costs. In contrast, we believe Google is undergoing a growth normalization phase that should stabilize in 2023, mitigating the impact on its operating leverage.
(Excerpt) Read more at seekingalpha.com ...
You buy any of this?
I think youtube is holding them up. I also think Youtube’s numbers are going the wrong direction. The content moderation has resulted in unwatchable bilge crammed full of commercial interruptions.
You squeeze mud, it escapes through the gaps in your bony fingers.
Nobody trusts them anymore, and when you lose trust, you lose revenue.
I remember buy ratings on Countrywide right up to the last week they were in existence.
Google has become a fat and lazy bureaucratic monster. It will have to ‘slim down’ by tens of thousands to appease investors.......................
H1B Currys are saddened. I guess it’s back to Bangalore to start companies with original ideas and provide value, not acting like parasites on the backs of American entrepreneurs.
American entrepreneurs like Sergey Brin, born in Moscow, USSR?
People talk like this? I bet he wants to be a weatherman as financial guys always seem to be weathervanes.
FTA: we discuss why Google has been relatively consistent with its OpEx spending over time. Moreover, its OpEx margins have also been trending down, unlike Meta Platforms. Notwithstanding, Google needs to reaccelerate its top line growth to justify a material re-rating. We discuss why the market has likely reflected significant uncertainties in its execution due to substantial macro and competitive headwinds.
I have been noticing how poorly Google (Alphabet?) stock price has performed over the last year vs IBM.
Yep. IBM is pretty solid and even pays a solid dividend.
So Old Tech is strong, but New Tech is weak?
I guess it could be based on the respective revenue models and how well the customer base is established.
IBM is one of the founding members of the 4th industrial Revolution aka WEF.
Yes, people talk like that.
Different industries have their own languages.
My industry is electronics.
We have our own vocabulary.....................
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