Key insights
- The article suggests that the current downturn in SaaS giants presents a significant buying opportunity for long-term investors. The author believes the next two earnings reports will clarify whether AI is disrupting these companies or amplifying their growth. Furthermore, potential tax-loss selling in Q4 could create further price drops, which the author views as a 'gift' for investors if underlying fundamentals remain strong, indicating a bullish outlook for those willing to hold long-term.
SaaS giants like INTU, ADBE, CRM, NOW and others are down big. I’ve already started building positions in a few of these, and honestly, I’m happy to see the prices fall even further as long as the underlying numbers stay solid. But the next 6 months are a huge opportunity for long-term investors. Here is why:
- The next 2 earnings will show the truth: Everyone is panicking about AI. These next two earnings reports will finally show us the reality, whether AI is actually disrupting these companies and causing them to decline, or if it's amplifying their business while they continue beating estimates. 2. The Peter Lynch Tax Dump: Even if these companies smash earnings, expect their stock prices to drop even lower later this year. Peter Lynch always pointed out that in Q4, both big hedge funds and individual investors aggressively dump their losing stocks. They do this for "tax-loss harvesting" - selling their losers before the end of the year to offset the taxes they owe on their winning trades. When everyone rushes for the exit at the same time just for a tax write-off, it forces stock prices.
The Bottom Line: We are about to see if these fundamentals are actually intact. If the upcoming earnings show these businesses are not disrupted and are still beating estimates, but we still see a price crash in November-December because of tax-loss selling, it is an absolute gift to long-term investors