The Xero share price could be heading a lot higher according to one broker…
The post Top broker tips Xero (ASX:XRO) share price to rise 24% appeared first on The Motley Fool Australia. –
The Xero Limited (ASX: XRO) share price is tumbling on Tuesday along with the rest of the tech sector.
In morning trade, the cloud accounting platform provider’s shares are down 3% to $133.30.
This means the Xero share price is now down over 12% since this time last month.
Is the Xero share price weakness a buying opportunity?
According to the team at Goldman Sachs, the Xero share price could be in the buy zone today.
A note out of the investment bank this morning reveals that its analysts have reiterated their buy rating and $165.00 price target on the company’s shares.
Based on the current Xero share price, this implies potential upside of almost 24% over the next 12 months.
What did the broker say?
Goldman notes that rival Intuit, the company behind the QuickBooks (QBO) platform, has just held its investor day event.
Its analysts highlight that the event provided targets and increased disclosure on a number of items which the broker sees as supportive of its positive view on the Xero share price.
The broker commented: “1. Xero International subscriber momentum stronger than Intuit in FY21, with +412k net adds (ex NA), vs. Intuit +11% growth (i.e. 160k net adds). 2. Intuit ecosystem strategy proof point for Xero, with c.38% of QBO FY21 revenues from Online Services (vs. XRO 7%), noting that 40% of QBO customers now use an ecosystem service or 3rd party app. 3. QBO ARPUs continue to track strongly, supported by mix shift to higher ARPU subs, higher platform revenues and less discounting internationally. 4. Reiterated financial targets for c.30% QBO revenue growth, driven by +10 to +20% Sub/ARPU growth respectively, in line with GSe FY22E Xero Revenue Growth +33%.
Goldman also notes that the recent pullback in the Xero share price has brought it down to lower than average multiples. Particularly in comparison to key peer WiseTech Global Ltd (ASX: WTC).
It concludes: “We re-iterate our Buy on Xero (12m TP of A$165), noting Xero has closed its premium vs. the ASX InfoTech index to 140% vs. 2 year average 179% (12mf EV/Sales), and is -27% cheaper on 12mf EV/Sales vs. key peer WTC. We expect revenue acceleration into FY22 to drive outperformance (+4% vs. VA Consensus) with significant LT opportunities to unlock further value (NZ$76bn TAM).”
Should you invest $1,000 in Xero right now?
Before you consider Xero, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Xero wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Motley Fool contributor James Mickleboro 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 WiseTech Global and Xero. The Motley Fool Australia owns shares of and has recommended WiseTech Global and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.