Google stock could get a boost from expected job cuts: Piper Sandler

Investing.com -- Google's parent company, Alphabet (NASDAQ:GOOGL ), may see a significant stock price boost due to expected cost-cutting measures, according to analysts at Piper Sandler.

The firm sees potential upside tied to reductions in headcount and operational expenses, which could offset current antitrust challenges.

"We have written recently about GOOGL's antitrust situation, which we see as complex but manageable. However, with the addition of new CFO Anat Ashkenazi, we see a new opportunity to rein in expenses," said Piper.

The key opportunity, according to the analysts, lies in new CFO Anat Ashkenazi's potential to streamline the company's expenses.

The firm's note benchmarks Alphabet against 17 other tech peers and identifies a clear path to savings through two primary areas: "moderating headcount" and "lower opex per head."

Piper Sandler's analysis points to these cost reductions having a positive impact on the company's stock, estimating a potential 12% upside.

This is seen as a compelling opportunity, particularly given the recent underperformance of Google's stock.

We looked at tech industry layoffs and headcount across 17 leading tech firms," said Piper Sandler. "Layoffs climbed to 317k last year (+31% y/y); however, headcount at a cohort of 17 leaders is only modestly below the peak. The industry is less lean than headline layoff announcements would imply."

They added that at $820k/head, GOOGL's cost of revenue is above the mean ($570k/head) but seems appropriate. However, "Opex at $510k/head is considerably above the average."

"Post benchmarking, we see opportunity to trim heads at GOOGL and to moderate employee opex," adds the firm.

Piper Sandler maintained its Overweight rating and a price target of $200 for Alphabet.

Source: Investing.com