One of the key indicators investors are looking at these days when deciding where to invest their money is layoffs. The strategy, referred to as a layoff watch, is quietly gaining a niche-following in investing circles.
With this strategy, analyze companies that have announced layoffs to understand if it is better to enter or exit the stock based on the latest information. It is important to make good sense of the information before moving forward. For example, if a company lays off staff, the move could signal a change in direction towards greater efficiency. On the other hand, it might be the case that the company is going through some financial troubles and is laying off employees to shore up cash.
The three companies on this list are suffering at the moment. And the principal reason they are letting go of talent is to curtail costs in the face of declining growth. For purposes of developing a layoff watch strategy, you should be keen to monitor the following stocks:
Intel (NASDAQ:INTC) is one of the biggest companies in the world, known for its innovative and high-quality products. However, in recent years, Intel has faced intense competition from companies like Advanced Micro Devices (NASDAQ:AMD), which have managed to chip away at Intel’s market share. Despite Intel’s best efforts to stay ahead of the curve, it has struggled to adapt to changing consumer needs and expectations.
Numerous factors have contributed to Intel’s decline, including stiff competition, rapid technological advancements, and shifting consumer preferences.
In addition, certain recent factors are also having a damaging effect on the company. Inflation all around the world is rampant.. You will seldom see companies like Intel doing well when prices are this high. For many households, the computer is still a discretionary expense, one they can afford to live without. Hence, PC sales are dwindling.
Also, a new report from Gartner’s research firm reveals that worldwide PC shipments totaled 68 million units in Q3, a 19.5% drop compared to the year-ago period. Under these circumstances, Intel’s main business lines are under pressure, which is why, according to Chief Executive Officer Pat Gelsinger, the third quarter represents the ‘bottom’ of its weak forecast.
Intel has already slashed its forecasts for the rest of the year. It’s also reportedly looking to lay off workers to help curb costs. But investors will need to keep Intel on layoff watch because more cuts could be around the corner. For several quarters, AMD has been taking away substantial market share from Intel. On top of this, a supply glut is looking menacing as well.
Snap (NYSE:SNAP) is a popular social media app that has quickly become one of the most engaging and fun ways to connect with friends online. While the app has been wildly successful in this regard, it has also faced some significant challenges over the years. For example, Snap’s growth has slowed considerably in recent months as it grapples with headwinds like declining user engagement and increasing competition from other social media platforms.
This is one of the main reasons Snap has not been doing so well this year. It’s been particularly weak in Q3, reporting its slowest quarterly sales growth ever, leading to a net loss of $360 million in the quarter, or 22 cents per share. Snap also experienced a drop in user engagement in the U.S. due to competition from other social media providers. According to Snap’s data, American Snapchatters spent 5% less time viewing content on the app in the latest quarter than last year. This trend is particularly worrying for advertisers, who rely on high levels of user engagement to maximize their return on investment.
Snap has been facing challenges in recent quarters, but management committed itself this summer to cut 20% of its workforce and refocus efforts on projects that will lead toward long-term growth. However, the company does not yet have a strong track record of profitability.
Ford Motor (F)
Ford Motor (NYSE:F) has been at the forefront of many groundbreaking automotive advancements in recent years. From its innovative line of EVs to its anticipated self-driving cars, Ford is committed to remaining at the cutting edge of the auto industry. And while many industry experts are optimistic about Ford’s prospects, some have raised concerns about one key factor: inflation.
With that, there are fears demand destruction could put a serious dent in Ford profits. Last month, Ford issued a profit warning, ringing alarm bells for investors. The automaker expects an additional $1 billion in inflation-related supplier costs, which is not all. Ford has 40,000-45,000 unfinished vehicles sitting idle because of a parts shortage.
Understandably the stock price took a tumble after the reporting of this news. However, it also means there are no surprises left for Ford investors this earnings season. The markets have absorbed this information. So we need not expect a tumble after the earnings report drops later this week.
For the next few quarters, Ford will remain under pressure, though. Inflation and supply chain issues will not be overcome overnight, so investors will likely stay away from the stock for the foreseeable future.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.