Where are Xero (ASX:XRO) shares headed in 2022?

Cloud software provider has rewarded its investors handsomely over the years, but that all came to a grinding halt in 2021. How will it fare in the new year?
The post Where are Xero (ASX:XRO) shares headed in 2022? appeared first on The Motley Fool Australia. –

New Zealand accounting software provider Xero Limited (ASX: XRO) has served investors pretty well over the years.

Its shares first floated on the NZX, but even during its 9-year ASX life, the stock has returned more than 2,900%. The last 5 years has seen the shares rise 750%.

But 2021 was a bit rough.

Xero shares are 5.5% down on the year, closing Thursday at $X.XX. The stock price flew as high as $157.99 and as low as $104.44 over 2021, taking shareholders on a stomach-churning ride.

So has the cloud software maker run out of steam? Is it one to have in your portfolio for the new year?

‘Best to be patient’

Medallion Financial managing director Michael Wayne told The Motley Fool that his clients were holding onto Xero.

“It has been a good performer over a long period of time. We are drawn to the capital-light and scalable software-as-a-service attributes of the business,” he said.

“We continue to be encouraged by the sticky nature of the product.”

However, he wouldn’t actively buy at the current prices. Perhaps one of the dips in 2022 will present an opportunity.

“We feel it best to be patient as the share price is prone to volatility,” he said. 

“All else remaining equal, we would look at buying around the $110 to $115 level.”

The Motley Fool analyst Chris Copley said much the same last month.

“There’s a lot of lofty expectations built into the [current] share price that investors should be wary of when investing in Xero,” he said in a video.

While its most spectacular years might be behind it, Copley reckoned it would still be a “market beater” in the long run.

“Its tail is long, which means I think it can get double-digit growth for a long period of time,” he said.

“You really do need to look well long term into the future for this one because even in 3 to 5 years, it’s still going to probably have quite a lofty multiple.”

Analysts divided on Xero shares 

According to CMC Markets, analysts don’t have a consensus view on Xero shares.

Eight out of 16 do currently rate them as a “strong buy”, but that’s somewhat cancelled out by 3 who classify the stock as a “strong sell”, and another 3 who recommend to hold.

The team at Credit Suisse likes the look of them heading into the new year. It rates Xero stocks as a buy, with a price target of $160, which is more than a 13% upside.

The Motley Fool’s Tristan Harrison reported Credit Suisse liked “the strong margins at Xero”.

“In the FY22 first half, its gross profit margin improved from 85.7% to 87.1%,” he wrote last week.

“Xero continues to see its annualised monthly recurring revenue (AMRR) increase, showing what the next 12 months of revenue could be. HY22 AMRR went up 29% to NZ$1.13 billion.”

The post Where are Xero (ASX:XRO) shares headed in 2022? appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

2 fantastic ASX growth shares Goldman Sachs rates as buys

Why did the Xero (ASX:XRO) share price have such a lousy month in November?

Are these 2 ASX tech shares good buys in December?

How to snare a multi-bagger ASX share: expert

3 reasons why the Xero (ASX:XRO) share price could be a high-quality buy

Motley Fool contributor Tony Yoo owns Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Xero. The Motley Fool Australia owns and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!