Is the Xero (ASX: XRO) share price good value for money? September 26, 2021
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the Xero Limited (ASX: XRO) Is the stock price a good value as it is currently around $ 150?
The past two weeks have seen some volatility for Xero stocks, but this can be normal for the stock market. Considering the price a month ago, it hasn’t changed much. But over the past six months, Xero’s share price has risen by around 18%.
What brokers think about the Xero share price
Different brokers have different ratings in the cloud accounting software market.
For example, Credit Suisse rates Xero as a buy with a price target of $ 160. The broker estimates that Xero’s average revenue per user (ARPU) may increase in FY 22 after tech share ASX recently increased subscription fees for subscribers. He also believes that Xero can continue to grow its subscriber base at a good rate.
However, there are also brokers who think the opposite of the Xero share price. Analysts Macquarie Group Ltd. (ASX: MQG) rates Xero as a sell with a target price of $ 130. This suggests that Macquarie believes Xero shares could fall more than 10% over the next 12 months, if the broker is correct.
One of the more recent thoughts on this price target is that Xero’s global accounting software rival, Intuit, recently revealed that it is buying Mailchimp for $ 12 billion. Intuit said the two companies “will work to realize the vision of an innovative end-to-end customer growth platform for small and medium-sized businesses, enabling them to bring their businesses online, market their businesses, manage customer relationships, benefit from insight and analysis, get paid, access capital, pay employees, optimize cash flow, be organized and stay compliant, with experts at your fingertips.
Macquarie is concerned that Mailchimp may decide to cut ties with Xero, which would make Xero less useful to subscribers and therefore some may leave. Intuit may be more successful globally, weakening the outlook for ASX tech stock.
What is the recent growth in ASX tech stock?
The Xero share price could be partly influenced by recent results and acquisitions.
In fiscal 21, it increased its operating revenue by 18% to $ 848.8 million and increased the number of subscribers by 20% to 2.74 million. Annualized monthly recurring revenue increased 17% to $ 963.6 million. The gross profit margin increased from 85.2% to 86%. Free cash flow jumped 110% to $ 57 million.
The company has decided to acquire several different businesses in recent times, including Planday, which is expected to contribute around three percentage points to operating revenue growth in fiscal 22.
Planday is a workforce management platform which, at the time of acquisition, had more than 350,000 employee users across Europe and the UK. The software aims to simplify employee planning, enabling businesses to forecast and manage their labor costs.
Xero said the acquisition would help grow its small business platform, helping subscribers cope with growing compliance demands, support more flexible forms of work and take care of their employees. When combined with Xero, it is able to provide information to a company or advisor that helps adjust staff levels to match business conditions and control labor costs, which are often the biggest expense of an employer.
The initial payment for Planday was 155.7 million euros, while the total potential consideration (based on achievements) is 183.5 million euros.