Dear readers,
Rarely have I been as eager to see how an earnings season would play out as I am this quarter. The ongoing discussions that Chinese open-source AI models could threaten the business models of U.S. frontier labs are unsettling many tech investors. As a result, the AI hype on the stock market is increasingly faltering.
Neocloud stocks from companies like CoreWeave or Nebius - which are very popular among retail investors - have lost 35–60% from their highs. Even Elon Musk’s fans, who are otherwise so used to success, are having to cope with the price declines of SpaceX (-50% in four weeks) and Tesla (-30% year-to-date).
Daily volatility in SaaS and platform stocks is also high and reaching elevated trading volumes in the run-up to earnings reports. Many of these stocks have fallen sharply since the beginning of the year and are consequently trading at low valuations - such as UiPath, Lyft, Upwork, or Monday. The short interest of these stocks has skyrocketed to 20–30% of the free float in recent months, meaning that more and more investors are speculating that these stocks will continue to fall. This doesn’t necessarily mean there are savvy, particularly well-informed investors behind it. I suspect that the short sellers are primarily momentum-driven hedge funds betting on a continuation of the SaaS crash. Unfortunately, I can’t prove this assumption.
However, my opinion on SaaS has not changed:
Given the historically low stock valuations, I see significant investment opportunities in those software companies that are flexible enough to adapt quickly to the AI era. The quarterly results reported last week by software giants SAP and ServiceNow certainly give cause for optimism ahead of the upcoming earnings season. Software stocks managed to recover at least somewhat by the end of last week following the release of the two software heavyweights’ figures.
And then there’s the upcoming takeover battle for PayPal:
This week, during the Q2 earnings call, PayPal’s management will likely no longer be able to ignore Stripe’s takeover bid. PayPal’s stock price is currently trading nearly 10% below that level. I expect the offer to be rejected as too low, however.
We have a particularly exciting week ahead of us!
Why Individual Investors Can Invest More Successfully Than Fund Managers
Over the past week, I’ve been thinking a lot about Terry Smith’s (the “English Warren Buffett”) capitulation. Some observers have already interpreted this as the beginning of the end for value investing. It reminded me of an old blog post of mine that sparked controversy nearly 10 years ago and whose thesis has been confirmed by recent events. Here’s my current take on active funds.
Monday.com is Cutting 20% of its Workforce: A Bold Move Towards AI or a Warning Sign?
The 20% workforce reduction at Monday announced last week took me by surprise. Just recently, the company was hiring new employees; now, about one in five employees will have to leave. Given that the guidance has been reaffirmed, there’s no reason for shareholders to panic - but management still has some explaining to do.
People Stock: From a Holding Company Discount to a Casino Bet
The investment case for People Inc. has fundamentally changed. Until now, People Inc., formerly IAC Holding, was a relatively straightforward "sum-of-the-parts" story. However, Barry Diller now wants to acquire a majority stake in the much larger MGM Resorts Group, thereby transforming People into one of the world’s largest hotel and casino holding companies. Here is my updated assessment of the new opportunity/risk profile...
Zoom Stock: Is It Time for Me to Buy Back In?
Three years after the end of the pandemic, the former COVID-19 star has evolved into a highly profitable cash flow machine with AI potential. Zoom’s early pre-IPO investment in Anthropic also provides a sort of safety net for the valuation. But is that enough for me to buy back in?
Airbnb Stock: Will Airbnb Become a Travel Super App?
It seems that Brian Chesky, the CEO of Airbnb, read my article from a year ago about Airbnb. At that time, I suggested that rental cars and boutique hotels would be logical additions. Now, these offerings are finally coming to the Airbnb app. The next step could be a partnership — or even a merger — with Lyft. Here’s my latest update on the Airbnb stock in my portfolio...
HubSpot Stock: Ready for a Comeback After SaaSMageddon?
Successful contrarian investing requires not only experience but, above all, a strong conviction in a stock. The best way to develop this conviction is through in-depth knowledge of the company and a clear investment case. In the following, I’d like to share my current assessment of HubSpot. The market has been a bit too quick to label the company as a supposed AI loser.
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Best,
Stefan Waldhauser
Disclaimer: This newsletter is an expression of opinion and does not constitute investment advice. Please note the legal information.