Is the Xero share price heading back over $100?

A guy shrugs his shoulders, not sure which is the right decision.

A guy shrugs his shoulders, not sure which is the right decision.

The Xero Limited (ASX: XRO) share price was a positive performer on Friday.

The cloud accounting platform provider’s shares rose almost 1% to end the week at $91.22.

This latest gain means the Xero share price is now up almost 20% since this time last month.

Though, it is worth noting that its shares are still down materially from their 52-week high of $156.65.

Can the Xero share price climb back beyond $100?

It has been three months since the Xero share price traded above $100.00 but it may not be long until it is beyond this level again.

That’s the view of analysts at Goldman Sachs, who recently reaffirmed their buy rating with a $113.00 price target.

Even after its strong gains over the last 30 days, this still implies potential upside of 24% for investors over the next 12 months.

Why is the broker bullish?

Goldman is bullish on Xero due to its belief that the company can grow its gross profit by an average of 22% per annum between FY 2023 and FY 2025. This is thanks to the stickiness and importance of its software and the low churn levels it is commanding compared to peers. The broker commented:

While noting that the near term remains robust, we do acknowledge the risk of higher churn from SME business challenges and recent price increases. Nevertheless, we see Xero as well-placed to navigate this uncertainty given the stickiness & importance of its software, and lower levels of churn vs. AU overall. We revise FY23-25 GP to reflect FX and higher churn/ARPU growth (price increases).

It is also worth noting that analysts at Citi also see scope for the Xero share price to climb beyond the $100 mark again. Its analysts have a buy rating and $108.00 price target on the company’s shares. Citi commented:

We see Xero’s decision to increase prices in ANZ and UK as an indication of the company’s confidence in its position in its core markets. While the changes would not have a full impact in FY23e, we estimate the changes represent a 8% uplift to group ARPU and represents upside to our ARPU forecasts. An increase in churn is a factor to consider especially given the slowing economic outlook.

The post Is the Xero share price heading back over $100? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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.

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