Lean and Mean: 7 Tech Stocks to Buy Amid Sector Downsizing


  • SAP (SAP): Strategic layoffs by SAP could spark growth by enhancing productivity and AI solutions.
  • PayPal (PYPL): Despite layoffs, PayPal’s AI focus keeps it competitive in digital payments.
  • Alphabet (GOOG, GOOGL): Alphabet’s layoffs aim to streamline AI innovation.
  • Read more about the top tech stocks to buy and hold today!
tech stocks - Lean and Mean: 7 Tech Stocks to Buy Amid Sector Downsizing

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While no one wants to be on the business end of a downsizing, for investors – particularly folks interested in tech stocks – the matter presents a possible nuanced opportunity. To be sure, when the pink slips fly, there’s usually a reason for it. Typically, it’s not a good one. However, from failure may arise a pathway toward sustainable success.

Fundamentally, layoffs generally facilitate streamlined operations and increased efficiencies. A strategic restriction may stem from identifying areas of lax functionalities. By addressing various vulnerabilities, companies can spark higher productivity, reduced waste, and superior resource allocation. All of these items represent music to the ears of tech stocks.

Also, it’s possible that tech-oriented enterprises may benefit more from layoffs than non-tech companies. Basically, by following its own advice on value-add and per-capita effectiveness, innovators can help themselves.

Of course, layoffs always underlie controversy because of the human element. You can’t forget that. At the same time, companies that identify their mistakes and set new frameworks could see their valuations rise. With that, below are tech stocks to buy amid sector downsizing.


SAP sign is seen at SAP SuccessFactors Global Headquarters in South San Francisco, California
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Multinational software company SAP (NYSE:SAP) represents an excellent starting point for tech stocks to buy during a broader downsizing. According to a CNBC report, SAP announced a restructuring plan last month that may impact over 7% of the company’s workforce. It aims to carry out voluntary buyouts or enable job changes for 8,000 employees.

On the surface, such a large figure sounds jarring. However, management is looking to accelerate growth, per the news agency. In part, it can possibly accomplish this directive through artificial intelligence. Personally, the move could be a shrewd one. As someone who thrives on finding distinct angles for content creation, I find generative AI platforms to be lacking. However, SAP primarily deals with supply chain management.

Back in the day when I was working the corporate grind, an AI protocol would have certainly accelerated productivity. Instead, we crunched numbers and formulated strategies “by hand.” SAP can accelerate its utility through a numbers-driven AI platform and such objectivity is where AI should thrive. Thus, SAP is one of the tech stocks to buy.

PayPal (PYPL)

PayPal logo and front of headquarters. PYPL stock
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Without question, digital payments and business solutions provider PayPal (NASDAQ:PYPL) symbolizes an ugly investment. It’s not exactly off to a great start in the new year. And in the past 52 weeks, PYPL lost roughly 23% of equity value. At its peak, PayPal shares on a weekly average basis exchanged hands at over $300. Those days might seem long gone, especially with rising competition in the digital services space.

As a result, PayPal unsurprisingly has been forced to issue pink slips. Late last month, the company stated that it will lay off 9% of its workforce. That translates to 2,500 positions to be eliminated. Further, InvestorPlace contributor Larry Ramer pointed out that the company dismissed about 2,000 employees last year. Still, this could end up being a long-term positive for the payments specialist.

With the company focused on AI-driven features, PayPal can help accelerate the business units that are working or enjoy burgeoning growth prospects. Further, analysts generally like the narrative with a consensus moderate buy view with a $69,95 average target. Notably, the high side lands at $95, making PYPL one of the tech stocks to consider.

Alphabet (GOOG, GOOGL)

Alphabet Inc. (GOOG, GOOGL) and Google logos seen displayed on smartphones. The Google stock split is happening today.
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As one of the giants among tech stocks – indeed a member of the so-called Magnificent 7 – Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) effectively owns the Internet. People no longer consider the Google search engine as a functional platform. Rather, they view it as a verb. It’s quite literally become part of the cultural landscape. Yet that alone hasn’t prevented the company from issuing layoffs.

As Louis Navellier mentioned, Alphabet is reportedly eliminating jobs at voice-activated software division Google Assistant. In addition, pink slips will be distributed to workers at Google’s Nest, Pixel, and Fitbit divisions. However, as Navellier remarked, investors shouldn’t be too worried. The cuts represent a necessary action for the enterprise to achieve long-term growth.

One reason it’s making the cuts is to focus on its generative AI technology. In my opinion, the tech – called Bard – has serious potential but it lacks utility for its myriad mistakes. It’s also unreasonably liberal, refusing to acknowledge who the 45th POTUS was.

These are issues that can be fixed easily, though. Analysts rate shares a strong buy, making GOOG and GOOGL excellent choices for tech stocks amid the layoffs.

Microsoft (MSFT)

Microsoft logo close up. Microsoft (MSFT) Flagship Store Fifth Avenue, Manhattan, NYC.
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Once a rather boring and predictable name among tech stocks, Microsoft (NASDAQ:MSFT) has been one of the sector’s hot players. Over the past 52 weeks, shares popped up almost 52%. That’s noticeably above the benchmark Nasdaq-100 index, which is no slouch at 38% up. However, the house that Bill Gates built has not been exempt from the layoff bug.

As I pointed out not too long ago, Microsoft issued job cuts as part of an “execution plan” that would reduce “areas of overlap.” Notably, this disclosure came a little more than three months after it closed the acquisition of Activision Blizzard. Still, the move wasn’t unexpected. The company was now a bit too top-heavy regarding its entertainment umbrella. Plus, discretionary spending had slowed to the point of the acquisition’s closing.

Moving forward, Microsoft will be leaner in the video game division. Also, it will have more resources to build on its AI-driven initiatives. Analysts peg shares a consensus strong buy with a $469.45 average price target. And the high-side target lands at $600.

Amazon (AMZN)

Closeup of the Amazon logo at Amazon campus in Palo Alto, California. The Palo Alto location hosts A9 Search, Amazon Web Services, and Amazon Game Studios teams. AMZN stock
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A company that needs no introduction to the game of tech stocks to buy, Amazon (NASDAQ:AMZN) has utterly dominated the e-commerce landscape. In doing so, the company controversially put many small businesses out of business. So, I suppose in an ironically twisted sense, some folks may look on with glee regarding Amazon’s latest layoffs.

A couple of days ago, CNBC reported that Amazon has cut hundreds of jobs across its One Medical and Pharmacy units. Further, the news agency reported that the company cut more than 27,000 jobs between late 2022 and mid-2023. At the time, tech stocks saw a massive downsizing amid soaring inflation and rising interest rates.

Also, at the beginning of this year, Amazon announced cuts in its Prime Video, MGM Studios, Buy with Prime, Twitch, and Audible units. Still, investors welcomed the development, sending AMZN up around 13% year-to-date.

Block (SQ)

Block logo over a background with former square logo. SQ stock.
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One of the most innovative firms in the financial technology (fintech) space, Block (NYSE:SQ) has really dove into the digital pulse of the nation and the wider global economy. From buy now, pay later (BNPL) platforms – thanks to its acquisition of Afterpay – to supporting the cryptocurrency revolution, Block has been all over the news. Unfortunately, that has also included less-than-auspicious headlines.

Recently, the fintech giant announced that it will cut around 1,000 people or 10% of the company’s headcount. “We decided it would be better to do at once rather than arbitrarily space them out, which didn’t seem fair to the individuals or to the company,” stated Block CEO Jack Dorsey. However, the disclosure wasn’t a surprise as management broadcasted the move in an earnings call last year.

Obviously, this move stinks for shareholders. However, over the long run, many tech stocks have become top heavy. As well, consumer economic challenges last year forced the issue. Nevertheless, I wouldn’t fret. According to Grand View Research, the BNPL sector could growth at a healthy compound annual growth rate (CAGR) of 26.1%. If so, it may hit a value of $38.57 billion by 2030.

Rent the Runway (RENT)

RENT stock: Person holding cellphone with logo of US e-commerce company Rent the Runway Inc on screen in front of business webpage
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Okay, you want speculation? If you’re interested in tech stocks, it kinda goes with the territory. On thate note, market gamblers should take a look at Rent the Runway (NASDAQ:RENT). Is it a garbage entity? It’s not great, that’s for sure. According to investment data aggregator Gurufocus, Rent suffers from three major warning signs. Including among them is an Altman Z-Score in negative territory, indicating significant distress.

However, in the post-pandemic ecosystem, I don’t like betting against shares that have high short interest. That’s the case with RENT stock, where the aforementioned metric comes in at 18.82% of its float. Also, the short interest ratio is elevated at 10.3 days to cover. Further, the fashion-focused e-commerce subscription business model is compelling, especially amid an improving economy.

Last month, Rent announced that it would lay off 10% of its corporate staff. Again, that’s gut-wrenching news for the impacted. However, with the company focused on finding some pathway to profitability, RENT could be interesting.

Adding to the intrigue, analysts rate shares a consensus moderate buy with a $1.34 price target. That implies over 152% upside, thus making it a potentially lucrative case of tech stocks to gamble on.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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