Why the Xero share price is racing higher and could keep climbing

The Xero Limited (ASX: XRO) share price has returned to form on Thursday.

In early afternoon trade, the cloud accounting platform provider’s shares are up 3.5% to $87.00.

Why is the Xero share price rising?

There have been a couple of catalysts for the rise in the Xero share price on Thursday.

The first has been a rebound in the local tech sector following a strong night of trade on Wall Street’s NASDAQ index.

For example, at the time of writing, the S&P/ASX All Technology Index is up a sizeable 2.4%.

Bullish broker note

Also giving the Xero share price a lift has been a broker note out of Goldman Sachs this morning.

According to the note, the broker has retained its buy rating and $111.00 price target on the company’s shares.

Based on the current Xero share price, this implies potential upside of almost 28% for investors over the next 12 months.

What did the broker say?

Goldman was pleased with what it heard at the latest Xerocon event in Sydney this week.

One of the items the broker highlighted was management’s commentary on the underperforming UK business. It explained:

Xero noted the weaker than expected UK sub growth was partly due to the slower than expected MTD impact, and partly from the restructuring/go-to market changes. However Xero noted that business revenue growth remains on track, and the company is focused on optimizing for the best long-term mix between subscriber and ARPU growth. Finally it was noted that the UK team understands what is happening and has a good handle on addressing the issues.

Another positive was the reception from partners to Xero’s 15% app store commission charge. Goldman said:

Commentary was supportive of Xero, with the 15% app-store fee well below distribution costs/commissions in other industries. Ecosystem partners had varying degrees of dependence on Xero for distribution, with direct sales a key focus for some, while some payment partners such as GoCardless (who operate in 30 countries) estimated c.25% of total volume was from Xero – we note the company recently (Feb-22) estimated it had > US$25bn in annual payments.

All in all, the broker remains positive on the company and continues to forecast strong growth over the medium term.

The post Why the Xero share price is racing higher and could keep climbing appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Why are ASX 200 tech shares having such a top run on Thursday?
• 5 things to watch on the ASX 200 on Thursday
• Financial powerhouse: Why I think these stats make Xero shares irresistible
• ASX 200 tech shares are getting hammered on Monday. Here’s why
• Up 20% in 2 months, is the Xero share price a buy today?

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.

from The Motley Fool Australia https://ift.tt/Wg6AkLZ