All eyes will be on the Xero Limited (ASX: XRO) share price next week.
This is because the cloud-based business and accounting software platform provider will be releasing its full year results on Thursday.
What is the market expecting from Xero?
This morning analysts at Goldman Sachs revealed what they are expecting from the company in FY 2021.
According to the note, the broker is forecasting sales growth of 16% to NZ$836 million for the 12 months. Goldman expects this to be driven by a 16% increase in ANZ sales and a 17% lift in International sales.
This is actually a touch under the market consensus estimate of NZ$854 million.
In respect to earnings, its analysts have pencilled in earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$218 million. This will be a 56% increase year on year and, once again, a touch short of the market consensus estimate of NZ$228 million.
On the bottom line, a net profit after tax of NZ$40 million is expected.
What about subs?
Goldman Sachs is expecting Xero’s positive momentum to continue and is forecasting 317,000 net subscriber additions in FY 2021.
This comprises 222,000 in the ANZ market and 95,000 internationally. The latter is expected to have been impacted by COVID-19 disruptions in the Northern Hemisphere.
And while the broker suspects that its average revenue per user (ARPU) metric may soften, it isn’t concerned by this.
It explained: “We forecast ARPU -2% to NZ$28.5, given geographic & sub mix shift, offset by solid underlying trends (noting the recent price rises will predominantly benefit FY22). We will focus on the growth in Xero platform revenues, which grew +21% in 1H21 but +50% when adjusting for Hubdoc reclassification. Our high frequency trackers show +25-32% annualized growth in the number of apps in Xero’s AU/UK/US ecosystems (as at early April), underpinning the value proposition.”
Is the Xero share price in the buy zone?
Goldman Sachs sees a lot of value in the Xero share price.
It currently has a buy rating and $153.00 price target on the company’s shares.
Based on today’s Xero share price, this implies potential upside of almost 15% over the next 12 months.
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More reading
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- Why the Xero (ASX:XRO) share price charged higher in April
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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 Bruce Jackson.
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