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Amazon Layoffs: Efficiency Era or Red Flag for Investors? · Earn Your Leisure

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  Speaker 2: So Amazon is importantly prepared to have the largest layoffs
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  Speaker 2: ever of the thirty thousand jobs is just the beginning
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  Speaker 2: of an efficiency erar or red flag for growth investors.
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  Speaker 3: I think a combination what's really ok I was gonna
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  Speaker 3: say both like it got you got but okay.
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  Speaker 4: So of course the headline is sensational thirty thousand people
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  Speaker 4: set to be laid off. The point that I think
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  Speaker 4: most people miss is that they're going to avoid hiring
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  Speaker 4: an additional one hundred and eighty thousand workers by twenty
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  Speaker 4: twenty seven. So that tells you because that the second
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  Speaker 4: biggest employer strong workforce. So if they are starting to
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  Speaker 4: be more efficient because of robotics and automation, the rest
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  Speaker 4: of the companies are going to have to follow suit.
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  Speaker 4: Which you have to give him credit, even though it
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  Speaker 4: was terrible the way he did it. Eli really started
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  Speaker 4: that initiative for efficiency through tech because of his investor
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  Speaker 4: into open Ai. So if Amazon is laying off that
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  Speaker 4: many jobs, it's going to reverberate through the rest of
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  Speaker 4: the marketplace and it's not going to be fun. And
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  Speaker 4: that's one of the pillars that I'm worried about going
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  Speaker 4: into twenty seven. The job market is won. The timing
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  Speaker 4: of the race. Put in GBT act as a world
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  Speaker 4: class investor, what is the date in which China should
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  Speaker 4: win the chip race and look at the dates that
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  Speaker 4: it may tell you worst case scenario in best case scenario.
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  Speaker 4: So I think this is definitely going to reshape the
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  Speaker 4: landscape of business and it's going to have a long
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  Speaker 4: lasting fact in the trophy. You want to take the
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  Speaker 4: other side of it, you definitely can, But I think
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  Speaker 4: it's a little bit of both.
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  Speaker 1: Yeah, I agree with you. I think I think it's both.
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  Speaker 1: I think it's an efficiency play. And this is what
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  Speaker 1: the market rewards when you see companies become more disciplined
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  Speaker 1: with how they're spending. And you're talking about thirty thousand employees.
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  Speaker 1: But these aren't just regular like office employees. These are
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  Speaker 1: like executive positions that they're taking away. You start to
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  Speaker 1: see more profitability when you start to cut salaries, right,
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  Speaker 1: so it's more cash flow, which means that that can
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  Speaker 1: be sustainable over the long term, which is a good
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  Speaker 1: thing and a bad thing, right, people lose jobs. You
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  Speaker 1: don't like to see that. But from the market standpoint,
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  Speaker 1: they like to see that. It's like when we hear
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  Speaker 1: a company buying back their stock, it's because, oh, they
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  Speaker 1: believe in the company so much they want to take
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  Speaker 1: away shares from the general public. The other part is
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  Speaker 1: that maybe it's a sign that they aren't producing at
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  Speaker 1: the levels that they thought amazon and they might have
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  Speaker 1: to just scale down. Right, we don't know that, which
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  Speaker 1: is why this week I think they reported on Thursday.
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  Speaker 3: We'll get to see. And so these these are some
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  Speaker 3: I wrote.
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  Speaker 1: These down the key things that I'm going to watch for,
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  Speaker 1: and I think you should watch for too. Right, in
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  Speaker 1: terms of how this can be a combination, the first
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  Speaker 1: thing is growth rates, so we want we talked about AWS,
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  Speaker 1: and we saw last week how important that was, in fact,
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  Speaker 1: even for our show, how important it was. Let's see
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  Speaker 1: if AWS has stayed steady or has it grown or
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  Speaker 1: has it lost some market share? Right, because that is
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  Speaker 1: a sign. Then the advertising business. Let's see if there's
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  Speaker 1: a growth there in advertising, because people forget how much
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  Speaker 1: in advertising that Amazon makes. We always talk about Google
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  Speaker 1: and YouTube and advertising, but Amazon makes and absolute killing.
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  Speaker 1: Then e commerce, the international, right have they expanded because
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  Speaker 1: that was one of those things when we talk about
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  Speaker 1: Yes they've dominated here, but they have an international presence, Yes,
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  Speaker 1: how is their growth here?
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  Speaker 3: And is their growth in the international e commerce?
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  Speaker 1: Those are the things that I'm watching for because it
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  Speaker 1: is one of my favorite companies and I refuse to
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  Speaker 1: trade options on it. I just own shares on it.
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  Speaker 1: To see what this thirty thousand really means short term,
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  Speaker 1: long term, right, Because if I start to see the
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  Speaker 1: growth rates and I start those things are all improvement,
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  Speaker 1: then it's just like, all right, this is an efficiency play.
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  Speaker 1: They want to scale down to have more revenue. If not,
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  Speaker 1: then it's a sign that hey, maybe we're not producing
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  Speaker 1: at the level that they thought they would this quarter.
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  Speaker 4: The issue that I've always has been a stock clubick
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  Speaker 4: since twenty nineteen in a retirement portfolio. The issue they
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  Speaker 4: always had was a margin issue. And saw I'd be
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  Speaker 4: very clear, gross margin forty eight percent. That margin is
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  Speaker 4: ten point five percent for a company that is almost
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  Speaker 4: a monopoly to be that big, that is a historically
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  Speaker 4: low profit margin. They're going to find a way to
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  Speaker 4: do anything they can now that it's acceptable to get
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  Speaker 4: the human capital costs off the balance sheet to drive
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  Speaker 4: profit up, and they are going to set the table
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  Speaker 4: for it to be okay for everyone else to do so.
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  Speaker 4: But once again, twenty twenty seven, they're going to avoid
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  Speaker 4: hiring another one hundred and eighty thousand workers. That's a
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  Speaker 4: big number to keep your eyes on. And if that
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  Speaker 4: stays true, the way that corporate is going to be reshifted.
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  Speaker 4: We're never going to go back to mass hiring the
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  Speaker 4: way that there was once done.
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  Speaker 3: Yeah.
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  Speaker 1: Yeah, and that profit margin is actually improved.
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  Speaker 3: We've seen it at like five. Yeah.
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  Speaker 1: When you said ten, I was like, oh shit, Yeah,
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  Speaker 1: it's actually improving two point five to five yep. And
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  Speaker 1: they're one of the leaders in terms of cap expand
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  Speaker 1: when it comes to AI.
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  Speaker 3: But you got to give them credit for that because through.
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  Speaker 4: Truncated net margin, they've always invested for the future, and
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  Speaker 4: now they are in a position to take advantage of it.
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  Speaker 4: They may be the pre em inted company the Russia,
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  Speaker 4: the usher than that I robot type, which is another
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  Speaker 4: thing that Elon is trying to do. And it's a
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  Speaker 4: race even amongst tech as we're in the world with
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  Speaker 4: China to see who can get automation inefficiency at scale,
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  Speaker 4: which is gonna.
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  Speaker 3: Decimate the job market. Yeah.
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  Speaker 1: Sure, they've kind of just been quiet, but just steadily.
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  Speaker 1: Like I mean, if you look at the stock, it's
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  Speaker 1: pretty much been flat for the year when you look
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  Speaker 1: at it. But even some of the moves they've made,
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  Speaker 1: like with their data center expansion, their partnership Withthropic, them
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  Speaker 1: increasing their partnership with Danthropig, they're making them moves.
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  Speaker 3: But I'm with you. I think they've always had the long.
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  Speaker 1: Term approach, like we're going to invest in that big
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  Speaker 1: so that we can pay off later.
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  Speaker 3: Yeah.
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  Speaker 4: But in April they were at one sixty ninety they're
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  Speaker 4: currently two twenty six ninety seven. So given the hard
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  Speaker 4: capital costs that have they've done a pretty tremendous shop
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  Speaker 4: and like you said, moving up that net margin from
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  Speaker 4: five to ten percent or ten point five to five percent. Yeah,
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  Speaker 4: over the last year and a half has been great.
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