Xero share price is tumbling 5%, but could it be worth a buy?

Man ponders a receipt as he looks at his laptop.Man ponders a receipt as he looks at his laptop.

The Xero Limited (ASX: XRO) share price is in the red today, but could better days be ahead?

Xero shares are currently trading at $78.01, a 6% fall. For perspective, the S&P/ASX 200 Index (ASX: XJO) is down 1.68% today.

So what’s going on with the Xero share price and what’s ahead?

Tech shares slide

Xero shares may be falling today, but they are not alone among ASX tech shares. The Megaport Ltd (ASX: MP1) share price is down nearly 7% today, while Appen Ltd (ASX: APX) shares are down 3% and Block Inc (ASX: SQ2) shares are tumbling nearly 9%.

The S&P/ASX All Technology Index (ASX: XTX) is down 3.68%.

Today’s fall follows a tough Thursday for technology stocks in the USA. The Nasdaq Composite Index (NASDAQ: .IXIC) fell 1.37%. The United States Federal Reserve lifted interest rates by 0.75 basis points and indicated more hikes could be ahead. This is placing pressure on technology valuations and sparking fears of a recession, as my Foolish colleague James noted this morning.

However, Goldman Sachs analysts have recently recommended Xero as a buy and placed a $111 price target on the company’s share price. This is a 42% upside on the current share price.

Analysts believe Xero is “well-placed” to navigate uncertainty given the “stickiness & importance of its software”.

Xero reported a 19% boost in subscriber growth in FY22 to 3.271 million subscribers. The company’s annualised monthly recurring revenue (AMRR) soared 28% to $1.2 billion while operating revenue lifted 29% to nearly $1.1 billion.

Commenting on the future outlook at the company’s annual general meeting in August, chair David Thodey said:

We remain optimistic about the market opportunities for the Xero product portfolio – cloud based accounting is fundamental to the success of small businesses.

Xero share price snapshot

The Xero share price has fallen 49% in the past year, while it has shed 45% in the year to date.

In comparison, the benchmark ASX 200 Index has fallen nearly 12% in the past year.

Xero has a market capitalisation of about $11.7 billion based on the current share price.

The post Xero share price is tumbling 5%, but could it be worth a buy? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Monica O’Shea 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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