A little over a week ago, Xero Ltd (ASX: XRO) shares were trading above $89.

Today, investors can pick them up for $72.32.

The cloud accounting stock is down another 2.60% on Tuesday, extending its weekly fall to around 13% and wiping out most of its August rebound.

Xero shares have now fallen roughly 37% in 2026 and almost 55% over the past 12 months, having traded as high as $166 over the past year.

That’s a huge change in what investors are being asked to pay for the same business.

And while a falling share price doesn’t automatically make a stock cheap, Xero is getting to a level where I think it deserves another look.

So, has one of the ASX’s best-known growth stocks finally fallen far enough?

Let’s take a closer look.

Why are Xero shares falling again?

The strange part is that there hasn’t been a new earnings downgrade or major company announcement behind this week’s fall.

Xero’s latest updates have mainly been substantial shareholder notices, while its FY26 result was actually pretty solid.

Revenue rose 31% to NZ$2.75 billion, annualised monthly recurring revenue climbed 37% to NZ$3.27 billion, and subscribers increased 11% to 4.92 million.

The problem is that investors are looking past those numbers and focusing on the risks.

Melio integration costs helped push net profit down 27% to NZ$167.4 million, while gross margin fell from 89% to 83.9%.

There are also questions around what AI could mean for software businesses and whether higher interest rates will keep pressure on growth stocks.

So, I don’t think this week’s decline is about one bad piece of news.

It just looks more like investors are still asking how much they should be willing to pay for Xero’s future growth.

Would I buy Xero shares?

At $72.32, I think Xero’s valuation is starting to look a lot more reasonable.

Morningstar’s quantitative valuation puts fair value at $102.60 per share, which is around 42% above the current price.

Of course, a valuation estimate is not a guarantee. Investors still need to watch Melio integration costs, margins, and whether AI changes the competitive landscape faster than expected.

But Xero still has nearly 5 million customers and plenty of room to grow internationally.

I would expect the share price to remain volatile in the short term.

But if I was investing with a 3-to-5-year view, I think Xero is starting to look like good value again.

The post Down 13% in a week: Is the Xero share price finally cheap enough to buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I’ve written before about one of the most useful questions in economics and investing.

It’s only three words:

And then what?

Warren Buffett has used the phrase in exactly that context. The point is simple: the first consequence of a decision is usually obvious. The second, third and fourth are where things get interesting.

One Nation’s new Superannuation proposal is a near-perfect example.

(Please put your political views – for or against – aside for a minute; this is about economics.)

The policy would allow eligible renters and mortgage holders to redirect 3 percentage points of the 12% compulsory Super contribution into take-home pay for up to three years.

First-order thinking says: more money in your bank account.

And, yes, that sounds good. Particularly when households are dealing with high mortgage repayments, rents and grocery bills.

But: and then what?

Some, probably most, of that money gets spent. More money chasing the same amount of goods and services adds to demand, and therefore to inflationary pressure.

And then what?

If inflation is stronger than it otherwise would have been, the Reserve Bank may have to keep interest rates higher for longer – or raise them further – eating into some (more) of the benefit.

And then what?

Three years later, the extra take-home pay disappears. But prices probably don’t fall. (When was the last time prices – other than maybe petrol or fruit & veg – fell?) 

Remember: Lower inflation doesn’t mean prices fall – just that they rise more slowly. So when that 3-year period expires, prices will be higher, but your take-home pay would be lower.

Oh, and the money diverted from Super wasn’t invested and compounding during that period!

The pollies aren’t wrong that people are doing it tough. It’s tempting to think a hand-out would solve that. But unfortunately, it’s not that easy. Because you have to ask and then what?

And the same is true in investing.

Imagine someone told you in 1974 that global air travel was going to increase roughly ten-fold over the following half-century.

They’d have been spectacularly right.

Global passenger journeys rose from about 421 million in 1974 to 4.27 billion in 2023.

You might reasonably have thought: “Bingo! I’ll buy shares in airlines.”

Except airlines have historically been terrible businesses.

They require enormous amounts of capital. They have high fixed costs. They’re exposed to fuel prices, recessions, wars, pandemics and regulation. And fierce competition has often meant much of the benefit from increasing demand has gone to passengers through cheaper fares rather than to airline shareholders through higher share prices and dividends.

Even today, peak body, the International Air Transport Association, expects the global airline industry’s return on invested capital to remain well below its cost of capital!

The prediction that more people will fly was right.

The investment results were… not good.

And then what?

We’ve seen something similar with lithium.

The first-order thesis was compelling: electric vehicles and battery storage are going to grow rapidly, therefore the world will need vastly more lithium.

Again, totally accurate.

But markets respond.

High lithium prices encouraged miners to expand existing projects, develop new ones and spend more on exploration.

Supply surged.

By 2024, lithium demand was around six times its 2015 level. Yet lithium prices had fallen back to around 2015 levels. The International Energy Agency says the huge increase in supply drove lithium prices down by more than 80% from their recent highs.

The demand thesis wasn’t wrong. It just ignored the subsequent actions and reactions.

“This technology will change the world” is interesting, but not an investment thesis.

“This industry will grow rapidly” is a forecast, not an investment thesis.

“This commodity will be needed in much greater quantities” is a good insight. But, no, not an investment thesis.

They’re very good starting points.

But you still need to ask what competitors will do. What suppliers will do. Whether new capacity will be added. Whether prices will fall.

Whether customers, suppliers or shareholders capture the benefits.
(And that’s before asking what the share price already accounts for!)

In other words:

And then what?

And then ask it again.

And again.

Because in economics, public policy and investing – in life in general, really – the first-order consequence is usually the easiest one to see. It’s the second, third and fourth that tend to get you. Or, more positively, that can provide opportunities.

Either way, the task is to think past just the initial impact.

To ask ‘And then what?’.

Fool on!

The post The most important question for investors appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

South32 Ltd (ASX: S32) shares have climbed around 1% on Wednesday to a fresh 52-week high of $5.26 a piece.

It’s been an incredible success story for the ASX mining stock over the past two months, with the shares flying 34% higher since mid-July alone. 

There have been several peaks and troughs, with the share price fluctuating anywhere between $2.55 in early September last year to today’s high of $5.24. But overall, South32 shares have been among the strongest performers on the ASX so far in 2026.

They’re now up 48% for the year to date and an enormous 101% higher than 12 months ago.

What is driving the latest share price rally?

Late last month, South32’s announced a substantial jump in its ore reserve estimate at its Sierra Gorda mine. The update extends the mine’s reserve life by another five years, to 2045.

The Sierra Gorda copper mine, in which South32 holds a 45% stake, is a large, open-pit operation in northern Chile. This major jump in ore reserves and resources comes after significant drilling to better define the orebody, providing more certainty over future production.

The announcement was shortly followed by South32’s standout FY26 earnings result. The miner posted a 1% increase in revenue from continuing operations, a 28% increase in EBITDA, and a 55% increase in underlying earnings.

The strong earnings result meant management was able to declare a final fully-franked dividend of 5.4 US cents per share for FY26. That’s almost double the miner’s final dividend for FY25 when it issued a final dividend of 2.6 US cents per share.

Investors were clearly thrilled with the rally of good news and many have rushed to snap up the shares.

What do brokers tip next for South32 shares?

Going forward, it looks like brokers are divided about where the shares could go next.

Market Index data shows the majority have a buy rating after a recent rally. The $5.12 average target price now implies a downside of around 3%.

On TradingView, sentiment is a little more mixed. Out of 13 analysts, six have a buy/strong buy rating and another six have a hold rating.

Again, the average target price of $5.26 implies the shares are now fully priced. 

The team at Morgans downgraded South32 shares to a hold after reviewing its FY26 numbers, and increased its price target to $4.90. The broker said it thinks the earnings upcycle is now reflected in the latest price. It also noted the stock has outperformed even the pure copper producers.

Elsewhere, RBC Capital recently upgraded South32 shares to a buy recommendation and raised its price target to $5.50.

The post South32 shares reach fresh 52-week high: Can they keep climbing? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.