Xero shares crash 63% in a year: Is there any upside left?

Xero Ltd (ASX: XRO) shares have climbed higher in Thursday lunchtime trade.

At the time of writing, the ASX tech shares are up around 3% and are changing hands at $57.70 each.

It’s great news for investors after the stock has suffered considerable losses over the past 12 months.

The shares have fallen around 22% over the past month, are down 49% for the year-to-date, and are also a huge 63% lower than this time last year.

What on earth is going on with Xero shares?

The cloud-based accounting software company has been smashed by a tech-sector wide selloff over the past year. This was driven by concerns that AI could replace the core services of companies like Xero. At the same time, investors were spooked that tech companies had quickly become overinflated and far above fair value.

There was also an investor rotation away from growth stocks and into defensive assets earlier this year, fuelled by ongoing global volatility and inflation concerns.

There hasn’t been any price sensitive news out of the company since May, so there isn’t any indication that the continued share price decline recently is down to any company specific factors.

It’s likely that, more recently, investors have been taking their profits off the table after the shares briefly rebounded in July and part of August.  

Over the past month, there has also been a renewal of macroeconomic pressures. These include the September interest rate hike, higher-than-expected inflation figures, and sky-high 10-year bond yields. 

Is there any upside left for the ASX tech shares? Or can we expect another rebound?

If expert sentiment is anything to go by, we could see a strong share price rebound over the next 12 months.

Market Index data shows the majority of brokers have a buy rating on the stock. The $112 average target price implies an upside of around 92%, at the time of writing.

Data is similar on TradingView. The majority (six out of seven) of analysts have a buy/strong buy rating on Xero shares. The $113.34 average target price implies an upside of around 94%. But some think the shares have the potential to jump 148% higher to $144.40 each, at the time of writing.

Last month, the team at Macquarie Group Ltd (ASX: MQG) flagged that US growth and AI monetisation could act as key catalysts for Xero shares. They added that the acquisition of Melio has dramatically expanded what Xero can chase in terms of market size.

Citi, Morgan Stanley and UBS are also positive on Xero shares. The three brokers both have a buy rating on the stock and forecast a target price of $113.60, $130, and $125 respectively.

Michael Gable from Fairmont Equities is less optimistic. He has a sell rating on Xero shares and is concerned that increasing bond yields and interest rates could continue to be a headwind for technology stocks like Xero.

The post Xero shares crash 63% in a year: Is there any upside left? appeared first on The Motley Fool Australia.

More reading

• How much could the Macquarie share price rise in the next year?
• How much passive income can I earn from a $950,000 superannuation balance?
• Down 60%, is this ASX growth share now too cheap to ignore?
• 2 ASX shares tipped to grow 62% or more in the next 12 months
• How much could the big 4 banks’ share prices fall?

Motley Fool contributor Samantha Menzies 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 Macquarie Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.