Xero share price sinks 10% to 52-week low following FY22 results miss

Xero shares are down to a new 52-week low after the release of its full-year results…
The post Xero share price sinks 10% to 52-week low following FY22 results miss appeared first on The Motley Fool Australia. –

The Xero Limited (ASX: XRO) share price is tumbling on Thursday morning.

At the time of writing, the cloud accounting platform provider’s shares are down 10% to a new 52-week low of $78.25.

Why is the Xero share price sinking today?

Investors have been selling down the Xero share price on Thursday for a couple of reasons.

The first is significant weakness in the tech sector following another selloff on the Nasdaq index overnight. This has led to the S&P/ASX All Technology Index falling a sizeable 5.1% this morning.

The other catalyst for the weakness in the Xero share price has been a negative reaction to the company’s full-year results.

What did Xero report?

For the 12 months ended 31 March, Xero reported a 29% increase in revenue to NZ$1.1 billion and a 28% jump in annualised monthly recurring revenue (AMRR) to NZ$1.2 billion.

This was underpinned by a 19% increase in total subscribers to 3.3 million thanks to growth in all markets. However, this subs growth wasn’t quite as strong as some were expecting, which could explain some of the weakness in the Xero share price today.

It was a similar story for its earnings, which fell short of expectations due to weaker operating margins.

The company reported an 11% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$212.7 million and a net loss of NZ$9.1 million.

What was the response?

Goldman Sachs has responded to Xero’s full-year results and described it as “solid”, though acknowledges that the company missed on revenue, earnings, and subscribers.

It commented:

XRO reported FY22 Sales/EBITDA/NPAT +29%/+11%/-NZ$37mn vs. pcp to NZ$1,097mn/NZ$213mn/-NZ$9mn, which was -1%/-2%/-NZ$13mn vs. GSe. Cash conversion was strong (GOCF +8% to NZ$236mn, = 111% of EBITDA), with XRO net cash decreasing to NZ$51mn (vs. NZ$257mn at FY21).

2H22 Sub growth was marginally softer vs. expectations (+258k vs. GSe +298k), with this weakness across all geographies (i.e. ANZ -10k, vs. GSe, International -30k). This is despite a solid churn profile in 2H22, with ANZ churn declining again. We note the UK business had subdued 3Q net adds, with 4Q improving.

Is the Xero share price in the buy zone?

Goldman Sachs currently has a buy rating and $133.00 price target on the company’s shares. This implies major upside potential for the Xero share price.

However, it is worth remembering that this recommendation and price target could change in the coming days once the broker has updated its financial model.

The post Xero share price sinks 10% to 52-week low following FY22 results miss appeared first on The Motley Fool Australia.

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 over 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 January 13th 2022

More reading

Xero share price in focus amid strong FY22 revenue growth but full-year loss
5 things to watch on the ASX 200 on Thursday
ASX 200 tech shares are staging a remarkable recovery today
Why EOS, Pendal, PolyNovo and Xero shares are charging higher
Why did the Xero share price just rebound 6%?

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. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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.

  • This field is for validation purposes and should be left unchanged.

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 - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!