Buying Xero shares? Here’s what to expect from this week’s update

If you own, or plan to own, Xero Ltd (ASX: XRO) shares, then you may know that this week is an important one for the cloud accounting platform provider.

That’s because it is scheduled to hold its inaugural investor day event on Thursday.

Ahead of the event, let’s now take a look at what the market is expecting from tech stock.

What is expected at the event?

Goldman Sachs has been looking ahead to the event and has laid out its expectations. It said:

We expect the session to outline the recently finalized Long Term strategy. We don’t expect any major changes, more we expect a strategy centered around refocusing the business on its core strengths (SMB cloud accounting within key existing geographies), while driving disciplined earnings growth (reorganizations, not restructures). This will be a result of ongoing product investment into core Xero features – but with an increased use of partnerships with best in class providers (Avalara, Finks, Sumday etc) – allowing Xero to lead on product to accelerate sub growth, while growing margins.

The broker is also looking for the following:

We also look for updates on: (1) The targeted growth plan in the US; (2) The path towards re-accelerating UK growth; (3) Strategies to sustain growth in the more mature ANZ business (incl. price & mix) alongside further commentary around recent leadership changes in APAC & AU; and (4) Uses of GenAI to drive value (i.e. Intuit Assist, Sage Copilot).

What about earnings guidance?

Goldman acknowledges that it is unlikely that Xero will release any medium term guidance with its investor day update.

However, in case it does, it has revealed what it will be looking for. It said:

Although desirable, we believe they [financial targets] are unlikely to be provided by XRO (outside of re-iterating the Rule-of-40 guardrails & opex composition outlook). However we forecast: (1) FY28 Revenue of NZ$3.0bn (VAe $3.1bn), a 16% CAGR (14% sub, +2% ARPU – impacted by geo mix, i.e. Aust ARPU +5%); and (2) FY28E EBIT margin of 24.3% (vs. VAe 25.8%).

Should you buy Xero shares?

Goldman is feeling confident going into the event and has reiterated its buy rating and $141.00 price target.

This implies potential upside of almost 16% for investors over the next 12 months.

The post Buying Xero shares? Here’s what to expect from this week’s update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and 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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