California-based LegalZoom (NASDAQ:LZ) may be having some problems. The company is downsizing its workforce, and the ramifications extend beyond LegalZoom and LZ stock.
You may have heard the radio commercials for LegalZoom. It’s a company that offers do-it-yourself legal documents online.
That might sound like a good business model, but a recent announcement suggests that LegalZoom may be in retrenchment mode. So, let’s delve into the details and see what this means for investors.
LegalZoom Layoffs: What You Need to Know
Here’s the lowdown. LegalZoom is reportedly eliminating its entire sales division in the company’s Austin, Texas, office. Furthermore, LegalZoom plans to shut down that office.
This round of layoffs will affect 122 LegalZoom employees. The market took the unfortunate news in stride, however, as LZ stock only dipped around 1% in midday trading today.
The bigger-picture story isn’t really about LegalZoom, though. LegalZoom is a technology company, and a number of technology business have implemented layoffs. These include famous names like Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
Sure, the overall unemployment rate was reported as 3.8% in August and again in September. Yet, that figure can conceal underlying issues in specific sectors of the economy.
In other words, technology businesses like LegalZoom may be having major problems that the overall employment numbers don’t reveal. Therefore, investors should zoom out and look at the big picture instead of taking the LegalZoom news as an isolated incident.
The Takeaway for Investors
LegalZoom’s job cuts shouldn’t prompt investors to dump all of their technology stocks. Yet, there is a troubling trend to take notice of as tech business continue to shed workers.
What you can do now is re-evaluate your holdings in the technology sector. Are you over-allocated? Be careful in 2023’s final quarter, especially if your portfolio is exposed to technology companies that have enacted multiple rounds of workforce reductions.
On the date of publication, David Moadel 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.
