Company Interview / FNArena's Cyber Monday stock pick: Xero

Rudi Filapek-Vandyck from Xero highlights Xero (ASX:XRO) as his preferred pick despite recent volatility impacting quality growth stocks, high PE technology names, and AI-focused companies. Filapek-Vandyck points to what he describes as bear market conditions for this segment, particularly severe within Australia. He states that Xero has suffered one of the harshest treatments in the market, with its share price declining dramatically after a major capital raising and the acquisition of the loss-making US firm, Melio. Filapek-Vandyck believes the market's current narrative and momentum, rather than fundamentals, have driven the price lower, but considers the stock’s present EBITDA multiple to be its lowest on record, especially when compared to rival Intuit ($INTU).

Filapek-Vandyck argues that Australia’s value-driven market and lower trading volumes make it less reliant on owning tech or SaaS stocks like Xero, in contrast to the US and Asian markets. He points to investor caution about expanding too quickly via acquisitions but maintains that integrating Melio will better position Xero to compete, especially in the US. He also notes that Xero remains a market leader in New Zealand, but faces a formidable competitor in the United States.

Looking ahead, Filapek-Vandyck sees promise in Xero’s AI innovation and new product rollouts, coupled with broker buy-ratings and ambitious analyst price targets, some nearly double the current share price.