To The Moon

The announcements of job cuts by two tech giants, Amazon and Meta, have received different reactions in the stock market.

$Amazon.com(AMZN)$  Amazon's shares dropped as much as 3.2% after it announced its second largest round of layoffs yesterday (21 March 2023) and closed down 1.25%.

While $Meta Platforms, Inc.(META)$  Meta's shares rose 7.25% on the day (14 Mar 2023) it announced its second wave of job cuts.

This disparity in market reactions can be attributed to several factors, including the reasons for the job cuts, the perceived impact on the companies' bottom line, and the overall market sentiment towards the tech sector.

Reasons given by Amazon on Job Cuts

First, let's examine the reasons behind the job cuts. Amazon's CEO, Andy Jassy, stated in a memo to staff that the job cuts were part of the company's ongoing efforts to streamline operations and focus on its core businesses. He also acknowledged that the uncertain economic environment had played a role in the decision. However, the company's history of job creation and its reputation as a major employer made the announcement a surprising one, which may have contributed to the negative market reaction.

What META said about Job Cuts

On the other hand, Meta's CEO, Mark Zuckerberg, framed the job cuts as part of the company's "Year of Efficiency" initiative, which aims to streamline operations and focus on its core products. This follows a previous round of job cuts announced in November 2022, which was also part of the same initiative. The company has also stated that it will be cancelling lower priority projects to focus on its key products. The market appears to have interpreted this move as a positive one, signaling a commitment to efficiency and a focus on core businesses.

Difference in the Type of Job Cuts

Another factor that may have contributed to the disparate market reactions is the perceived impact of the job cuts on the companies' bottom line. Amazon's job cuts were significant, with a total of 27,000 positions eliminated in recent months. This represents 9% of the company's corporate workforce, which is a substantial reduction. The market may have interpreted this as a sign of trouble for the company, as a large reduction in workforce could lead to a decrease in productivity and revenue.

In contrast, Meta's job cuts were also significant, with around 10,000 positions to be eliminated and an additional 5,000 roles to remain unfilled. However, the market appears to have interpreted this as a positive move, as the company is focusing on its core products and streamlining operations. This could lead to increased productivity and revenue, which could explain the positive market reaction.

Market Sentiment

Finally, the overall market sentiment towards the tech sector may have played a role in the disparate market reactions. The tech sector has been under increased scrutiny in recent years, with concerns about privacy, antitrust, and regulation. This has led to increased volatility in the stock market, particularly for large tech companies. The market may be more cautious about Amazon's job cuts, as the company is seen as a dominant player in the tech sector and any negative news could have wider implications. In contrast, Meta is a “newer” company and is not seen as a dominant player in the same way as Amazon. This could explain the more positive market reaction to the company's job cuts.

Conclusion

In conclusion, the announcements of job cuts by Amazon and Meta have received different reactions in the stock market. While Amazon's shares dropped after the announcement, Meta's shares rose. This disparity in market reactions can be attributed to several factors, including the reasons for the job cuts, the perceived impact on the companies' bottom line, and the overall market sentiment towards the tech sector.

My Take on Amazon Stock

Based on the weekly chart above, the long-term key support level is around 80, this support level extends all the way to the pre-covid times. As such if you like Amazon and is a long-term investor who buys and hold your stock for a long time, you may consider selling Put Options with the strike price of 80 and below expiring in the next few months$AMZN 20230519 80.0 PUT$ $AMZN 20230519 80.0 PUT$   . Even if you get assigned to buy 100 shares of Amazon, it is not too bad as the premium you collected from selling the Put Options can help to lower your buying price.

What is Put Option Selling

Put option selling is a trading strategy where an investor sells the right to sell a particular stock or asset at a predetermined price (strike price) to another party, in exchange for a premium. The seller of the put option is obligated to buy the underlying asset at the strike price if the buyer decides to exercise their right to sell it, regardless of the current market price of the asset. This means that the seller is betting that the price of the underlying asset will either remain stable or rise above the strike price, allowing them to keep the premium without having to purchase the asset. Put option selling can be a profitable strategy in a stagnant or bullish market, but it carries the risk of potential losses if the price of the underlying asset falls significantly.

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