Why are Xero shares outperforming the ASX 200 today?
The post The Xero (ASX:XRO) share price is holding up ASX tech shares today appeared first on The Motley Fool Australia. –
The S&P/ASX 200 Index (ASX: XJO) has kicked off this Monday’s trading on a positive footing. At the time of writing, the ASX 200 is up a healthy 0.43% to 7,447 points.
The Xero Limited (ASX: XRO) share price is recording higher gains though. Xero is currently being priced at $150.54 each, 0.57% higher for the day so far.
It’s one of the more fortunate companies in the ASX tech sector today, which is mostly experiencing some selling pressure today so far.
Why are ASX 200 tech shares being sold off today?
Well, Xero’s outperformance doesn’t appear to be anything to do with the company specifically. The company has not made any major or price-sensitive announcements to investors thus far this Monday. Or for almost a month, come to think of it.
What we do see though is what seems to be a market-wide rejection of ASX tech shares today.
It could be worse for Xero this Monday. Although Xero is in the green, other ASX tech shares, ranging from Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) to Zip Co Ltd (ASX: Z1P) and Altium Limited (ASX: ALU), are in the red across the board. Indeed, the S&P/ASX All Technology Index (ASX: XTX) is currently down by 0.61%.
So what’s going on here?
Well, this sell-off might have been sparked by what happened on the US markets last week. On Friday night (our time), the US’s tech-heavy NASDAQ-100 (INDEXNASDAQ: NDX) Index lost 0.87%. Tech shares, both here and in the US, have been struggling with rising government bond yields in recent weeks.
Although bond yields don’t have a direct impact on tech shares specifically, they still can have a big impact on how tech companies in particular are valued by investors. That’s because rising yields increase the risks of owning companies that are still in their ‘growth phases’ and not yet bringing in meaningful positive earnings.
That arguably covers many shares in the tech sector, including Afterpay and Xero. After all, the Xero share price is today being valued with an eye-watering price-to-earnings (P/E) ratio of 1,166.
Could Xero shares be a buy today?
So with the Xero share price now ‘only’ up 2.48% over the year to date, many investors might be wondering if this is a buying opportunity for Xero. One broker who thinks it might be is Goldman Sachs.
As my Fool colleague James covered last week, Goldman is currently rating Xero as a ‘buy’ with a 12-month share price target of $165 a share. That implies a future potential upside of more than10% over the next year. Goldman likes how Xero’s growth rates are holding up and feels like the company is now more fairly priced than it was in the past.
At the current Xero share price of $150.22 a share, this company has a market capitalisation of $22.32 billion.
The post The Xero (ASX:XRO) share price is holding up ASX tech shares today appeared first on The Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Altium, Appen Ltd, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO, Altium, Appen Ltd, and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.