The Xero (ASX: XRO) share price is taking a knock today, down 2.5%. Here’s why we might be seeing a sell-off in this popular ASX growth share
The post What’s with the Xero (ASX:XRO) share price drop today? appeared first on The Motley Fool Australia. –
The S&P/ASX 200 Index (ASX: XJO) is having a pretty flat day today. At the time of writing, the ASX 200 is down a measly 0.08% to 6,851 points.
One ASX growth share is faring a little worse, though. The Xero Limited (ASX: XRO) share price is down 2.58% at the time of writing to $130.38 a share. Xero shares closed at $133.81 yesterday but opened at $133.47 this morning and have trended lower ever since.
Today’s move continues a trend in 2021 – a year that has surprisingly not been a good one for Xero. Since the start of the year, Xero shares are down 12%. In fact, Xero has fallen more than 15% since its last all-time high back in December.
To be fair, Xero did have a corker of a year in 2020, rising roughly 85% over the year. But still, the ASX 200 is up 2.7% in 2021, while Xero is down almost 12%.
So what’s going on today?
Well, there are no major announcements out of Xero recently. Apart from some routine stock issuance notices (unlikely to move the market). But an interesting report from the Australian Financial Review (AFR) today might have something to do with Xero’s movements.
MYOB told to mind its own competition
The AFR reports that Xero’s competitor MYOB has run into trouble with the Australian Competition and Consumer Commission (ACCC) regarding a potential acquisition.
MYOB is proposing to acquire the Australian arm of GreatSoft, a South African-based company. GreatSoft offers a cloud-based accounting software model that can integrate with other software, including Xero’s. MYOB used to be an ASX-listed company but was acquired by the private equity group KKR a few years ago.
The ACCC has outlined preliminary competition concerns over the proposed deal. It stated that “we are concerned that if MYOB acquired GreatSoft, there would only be three major suppliers of practice management software to medium-to-large accounting firms”.
Typically, an announcement that one of Xero’s rivals is being hampered by the ACCC might cause investors to assume it would benefit Xero. But perhaps investors are worried that the ACCC’s assessment of the accounting software market as potentially uncompetitive might spill over to Xero in the future.
Or perhaps investors are simply continuing to take profits off the table after Xero’s stellar year last year. The company does have an eye-watering price-to-earnings (P/E) ratio of 548 on current prices. That could be making some investors uneasy.
Whatever the reason for Xero’s poor share price performance today, all we know for certain is that investors are getting jittery.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.