Is the Xero Limited (ASX: XRO) share price a buy? Investors didn’t think so yesterday as the Xero share price dropped 4.8% in reaction to the FY20 result.

Xero FY20 result

I thought the FY20 report was actually good from Xero, it’s just that investors were seemingly expecting even more from the result and outlook.

Xero reported that free cash flow increased by 320% to NZ$27.1 million. Net profit after tax (NPAT) came in at $3.3 million, an improvement from the NZ$27.1 million loss in FY19. As free cash flow grows it should mean investors are more willing to pay for a higher Xero share price over time.

Total subscribers rose by 26% to 2.285 million and average revenue per user increased by 2% to NZ$29.93. Operating revenue increased by 30% to NZ$718 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 88% to NZ$137.7 million.

One of the most attractive parts to me was that the gross margin increased from 83.6% to 85.2%.

Subscriber number growth was good across the world. North American subscribers grew 24% to 241,000, UK subscribers grew 32% to 613,000, Australian subscribers grew by 26% to 914,000, New Zealand subscribers rose 12% to 392,000 and the rest of the world subscribers rose by 51% to 125,000.

Is the Xero share price a buy?

Xero said that whilst FY20 was strong, trading in early FY21 has been impacted by the coronavirus. Uncertainty meant it would be speculative for the company to say anything else about FY21 expectations.

However, the company did say that it still aims to be a long-term orientated, high-growth business. That’s a good sign, but obviously not surprising. 

After a share price fall of 5% for Xero, I think it looks a bit better at under $80. The question will be how many businesses will permanently fold as a result of the coronavirus crisis. How many subscribers will Xero lose from its total?

Keep in mind that the interest rate in Australia and New Zealand is now incredibly low. This should mean that growth is even more valuable. I’d be happy to buy a small parcel of Xero shares at this price, but I’d be wary about buying too much because of the high expectations built in at this level.

More reading

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• ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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On Thursday the S&P/ASX 200 Index (ASX: XJO) was out of form and sank notably lower. The benchmark index fell a disappointing 1.7% to 5,328.7 points.

Will the market be able to bounce back from this on Friday? Here are five things to watch:

ASX 200 set to rebound.

The ASX 200 looks set to rebound from this decline on Friday. According to the latest SPI futures, the benchmark index is expected to jump 0.95% or 51 points at the open. This follows a wild night of trade on Wall Street which eventually saw the Dow Jones rise 1.6%, the S&P 500 climb 1.15%, and the Nasdaq push 0.9% higher.

Big four banks to rise?

Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks could be on the rise today after their U.S. counterparts had a strong night of trade. Bank of America and JPMorgan climbed over 4%, whereas Citigroup ended the session 3.6% higher and Wells Fargo rose almost 7%.

Oil prices rocket.

It looks set to be a positive finish to the week for energy producers such as Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL). According to Bloomberg, the WTI crude oil price is up 10% to US$27.82 a barrel and the Brent crude oil price has jumped 7.5% to US$31.38 a barrel. A dip in U.S. stockpiles sent oil prices charging higher.

Gold price jumps higher.

Australian gold miners including Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) could be on the rise today after another positive night for the gold price. According to CNBC, the spot gold price is up 1.4% to US$1,739.90 an ounce. Traders have been buying the precious metal amid concerns over recession and trade war risks.

National Storage given sell rating.

The National Storage REIT (ASX: NSR) share price could come under pressure today after Goldman Sachs slapped a sell rating on the storage giant’s shares. The broker expects higher unemployment and softer economic activity to lead to lower revenues in the medium term. Goldman Sachs has a $1.56 price target on the company’s shares.

Returns as of 7/4/2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More reading

• 4 top ASX 200 shares for blue chip investors
• Is this ASX 200 REIT a bargain right now?
• ASX 200 drops 1.7%, Xero reports a profit
• Leading broker names CBA shares as a sell
• ASX fundie says ASX 200 was more volatile in March than during the GFC

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