The Xero Limited (ASX: XRO) share price has been caught up in the market selloff on Wednesday.
In afternoon trade, the cloud accounting platform provider's shares are down 6% to $85.60.
This means the Xero share price is now down 41% since the start of the year.
Why is the Xero share price sinking today?
Xero and the rest of the market are being sold off today after US inflation came in hotter than anticipated. This has many now believing that the US Federal Reserve will have to be more aggressive with its rate hikes, which has the potential to put the US economy into a recession.
In addition, rising rates are a problem for tech valuations. The higher that rates go, the less investors are willing to pay to own stocks. After all, if you could get a 4% return from a risk-free savings account, you'd need a much more attractive potential return from shares to put your funds at risk.
Is this a buying opportunity for investors?
The team at Citi appear to see today's Xero share price weakness as a buying opportunity for investors.
This morning its analysts released a broker note which revealed that they have retained their buy rating with a $106.80 price target.
Based on the current Xero share price, this implies potential upside of almost 25% for investors over the next 12 months.
Bell Potter has been looking at Xero's research and development (R&D) activities. And while it has mixed thoughts, it has seen enough to remain positive. It commented:
We see potential that Xero's current code base and architecture as well as the Future of Xero program which is focused on re-writing the code base are reasons for Xero's elevated R&D spend and could also be impacting its speed to market with new products/functionality. On a positive note, we see potential for leverage to come through once the program is completed successfully and also see potential for it to speed up product development especially in terms of localisation.
