Companies are focused on growth. Sometimes, things don’t go to plan, and they have to cut back on headcount. That’s a bad sign. But sometimes, a company that’s growing finds ways to do more with fewer employees.
That’s why markets send shares of a company higher after what first appears to be bad news. If a company can continue to grow with a smaller headcount, its profitability improves.
With many of today’s AI trends underway, job layoffs at a company could be good news. For now, it’s good news for Dell Technologies (DELL).
Reducing their total employees and refocusing on the AI trend will allow Dell to grow faster. The computer hardware producer is expected to see strong growth with AI-enabled computer manufacturing, and with large-scale digital infrastructure projects.
Even though shares are up 70% over the past year, Dell is still cheap at 13 times forward earnings. And improving sales could help boost its profit margins further.
Action to take: Investors may like shares here, and should keep an eye out to add to that position on market pullbacks. Dell also pays a 1.9% dividend at current prices.
For traders, the December $115 calls, last trading for about $8.50, could see mid-double-digit returns over the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.