# XRO - Xero Limited



## System (8 November 2012)

Xero Limited (XRO) is a SaaS (Software as a Service) company headquartered in Wellington and operating globally with a presence in its key markets of Australia, the United Kingdom and the United States.

Xero's accounting software is hosted securely on the Internet and connects small businesses to their advisors and other services, providing business owners with real-time visibility of their financial position in a way that’s simple, smart and secure.

For accountants, Xero forges a trusted relationship with clients through online collaboration and gives accountants the opportunity to extend their services. Over 111,000 businesses globally run Xero, in over 100 countries.

http://www.xero.com


----------



## skc (4 July 2013)

Anyone following this stock? It has been rising non-stop since listing and is now worth a massive $1.75B

To put it in perspective, in May it reported revenue of ~NZ$40m and a net loss of $14m.

Ancedotally, I've heard good things about this company in terms of its product offering. 

But this is one heck of a valuation?! Market cap / revenue of >50x is unheard of unless you are facebook or something.

An article on the SMH this morning



> The shares rose 3.9 per cent to $NZ17.40 in morning trading - valuing the Wellington-based company at $NZ2.04 billion and adding to its 120 per cent jump this year. That makes it the 11th biggest company on the New Zealand stock exchange, leapfrogging online auction site Trade Me, which is valued at $NZ1.96 billion.
> ...
> 
> Xero has attracted 157,000 customers, the bulk of which are in Australia and New Zealand, giving it annualised monthly revenue of about $NZ51.5m, or about $NZ328 per client.
> ...




Even if they reach the target it seems grossly overpriced?! Thoughts anyone?!

EDIT:
FWIW, MYOB was bought by private equity in 2011 for $1.2B and had annual revenue of ~$200m. So at 6x market cap/revenue (actually I am not sure re: debt situation of the PE deal), XRO need to increase revenue to $300m... So may be at 1m customers it wouldn't be a stretch (but they need to get there first).


----------



## sinner (4 July 2013)

From a tech perspective it's a good product, everyone I know who uses it prefers it over competitors like saasu and lightyears ahead of stuff like MYOB. Lots of good features, and relatively easy to add new features to products like this.

New business owners will go with Xero. But there is huge intertia around MYOB in existing businesses, to succeed Xero will need to fight that intertia.


----------



## McLovin (4 July 2013)

I had a look at this last year when they listed on the ASX. It's going to be pretty hard for the business to meet the valuation. The product is good (I've used it) but I thought there was a lot of blue sky in price at $7.

I wonder if these cloud based system will reduce the inertia somewhat?


----------



## Ves (5 July 2013)

Agree with all of the thoughts above - this is a great product.   But the revenue multiple is mind boggling.  The operating margins will improve over time as they are heavily discounting at the moment in order to grow rapidly.   However, as SKC said, even at their target figures, this looks super expensive.

You guys mentioned a few others, but it's now almost 6 times the Enterprise Value of RKN.

Reminds me of dot-com mania.


----------



## DJG (17 October 2013)

Well since I've been on the computer and looking at XRO, it has gained about 3-4% in about 30 minutes.

Is this company just another silicone valley type model?


----------



## pavilion103 (17 October 2013)

Someone at work asked me about this one a few weeks back. I said like it at 17.00.
He didn't want to buy because it was at all time highs. Hit 22 this morning.


----------



## DJG (18 October 2013)

pavilion103 said:


> Someone at work asked me about this one a few weeks back. I said like it at 17.00.
> He didn't want to buy because it was at all time highs. Hit 22 this morning.




What are people basing these insane premiums on?


----------



## DJG (24 October 2013)

If they're currently running at a loss and heavily discounting as mentioned above. What does everyone think they will do when they actually need to start turning a profit?

Increase prices of the software? If so, increase them to what? (have they made mention of this?)
Otherwise cut costs I assume.


----------



## pavilion103 (24 October 2013)

DJG said:


> What are people basing these insane premiums on?




Dunno. 

I'd be out now. That exponential growth would have been a nice little profit.  Wouldn't be interested in holding onto it.


----------



## DJG (24 October 2013)

pavilion103 said:


> Dunno.
> 
> I'd be out now. That exponential growth would have been a nice little profit.  Wouldn't be interested in holding onto it.



I reckon there is a good chance of it going down hill. I could be wrong though but I just seriously can't see the value in it especially if they believe they're locking people in and they won't care about the inevitable price hike. 

Most them probably jumped ship to Xero, no saying they won't jump off the same ship.


----------



## PinguPingu (25 October 2013)

You only need to look at US stocks like TSLA to see how ridiculous the market can push these guys.


----------



## DJG (4 November 2013)

PinguPingu said:


> You only need to look at US stocks like TSLA to see how ridiculous the market can push these guys.



I wonder if it's topple-over will continue to decline or just be another bump on the way up. 

Going by the email I sent to XRO, they have no intention to increase their prices in the future and don't believe increasing their prices is the answer to becoming profitable.


----------



## McLovin (4 November 2013)

Isn't the MO of these guys to build economies of scale? Afterall, each additional user costs virtually nothing and accounting software probably has some of the highest customer retention rates of any product/industry. So once you've got them in they're almost like an annuity. Even better with this new model of charging by the month. What's the old saying about a frog in hot water?

The software is pretty good. And beats the hell out of MYOB/Reckon.


----------



## pavilion103 (6 November 2013)

Lol this is ridiculous. $34.20 right now!!


----------



## pavilion103 (7 November 2013)

Timberrrrrrr.....


----------



## tech/a (7 November 2013)

pavilion103 said:


> Timberrrrrrr.....




Today is a pivot point reversal (meaning the high of today exceeded the high of yesterday and the close of today will be lower than the high of yesterday.)
And a very aggressive one so Id be out!


----------



## pavilion103 (7 November 2013)

Yes it looks like the end of the road. Huge sell off today.


----------



## DJG (7 November 2013)

pavilion103 said:


> Yes it looks like the end of the road. Huge sell off today.




Inevitable! How's the volume!


----------



## MARKETWINNER (4 January 2014)

XERO is one of the star performers in the global stock markets.  Recently when my daughter did research on this company for her accountancy subject in School   it was trading around NZD 18 and she said it has a potential.  I should have listened to her and should have parked all my money there. It went up immediately after my daughter’s comment and traded around NZD 35 in the New Zealand Exchange. 

In global markets analysts and other market players will follow current popular stocks, index and other stocks while neglecting some out of favour stocks with more than ten bagger characteristics. These are life time opportunities and only few can identity these types of hidden gems before others. Even now if we can do some home work we should be able to identify more than ten bagger stocks from all types of markets such as developed, emerging and frontier markets .I have seen these types of stocks  in few stock markets. I like to follow these types of stocks. So we can forget market volatility, charts and other factors while having good sleep.

Remember 10 years back above stock was trading around NZD 1 and it has become more than 30 baggers now. If we want to outperform market, index and all other instruments at least we should have one more than 20 baggers in our basket. Even now there may be stocks with more than 30 baggers characteristics in global markets. 
Investing in correct stocks could lead to making fortune. Have a great 2014.

When stocks make new high they can go up further. Similarly when stocks make new low they can go down further. 

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


----------



## oldblue (5 January 2014)

There's no question that XRO has been an outstanding growth stock, clearly one of the best on the NZ and Aust bourses in recent years! But its SP has now levelled out around $NZ32.60 on very modest volumes. The big issue for this stock now is " Where to now?" - rather than " Look where its been!"


----------



## MARKETWINNER (5 January 2014)

Yes I agree with you. Still we can do some home work on their coming growth story.


----------



## skc (9 January 2014)

Interesting article by John at Brontecapital on XRO.

http://brontecapital.blogspot.com.au/2014/01/xero-and-precious-petals-of-new-zealand.html


----------



## Klogg (9 January 2014)

skc said:


> Interesting article by John at Brontecapital on XRO.
> 
> http://brontecapital.blogspot.com.au/2014/01/xero-and-precious-petals-of-new-zealand.html




About a month ago I marked down a paper trade, shorting XRO (I've never shorted anything before and thought this was a valid test case). Then I read this article and I started questioning my paper trade...

I still don't see how they'll fill the void and reach a sustainable P/E at the current price (I only ran some basic calcs), but maybe I'm not open-minded enough. Plus I haven't played enough with the product.


----------



## piggybank (9 January 2014)




----------



## piggybank (15 January 2014)

It closed today at $39.74 up 10% since my last post last week. Given its rate of appreciation it may yet be bigger than RIO/CBA by years end!!


----------



## piggybank (22 January 2014)

Hi,

There was a company announcement today (via the ASX) of an update of Executive Officers names and positions.

http://stocknessmonster.com/news-item?S=XRO&E=ASX&N=401167


----------



## FxTrader (4 April 2014)

piggybank said:


> It closed today at $39.74 up 10% since my last post last week. Given its rate of appreciation it may yet be bigger than RIO/CBA by years end!!




Hit a high of 42.96 in early March but has now retraced to $34.50 in less than a month.  Just reported a loss of $NZ35 million ($32.4 million) in the 12 months ending March 31, compared with $14.4 million in the previous year.

Market cap of $1044m and -14% ROE, great business!  This freight train has crashed and the lemmings who lined up to buy it at $40+ are now feeling the pain of a speculative swan dive.  Herd behaviour in the market was the only reason XRO had such a stratospheric market valuation, pure spec stock. It was trading at $15 last Oct and that's probably where it belongs now, at best.


----------



## skc (4 April 2014)

FxTrader said:


> Hit a high of 42.96 in early March but has now retraced to $34.50 in less than a month.  Just reported a loss of $NZ35 million ($32.4 million) in the 12 months ending March 31, compared with $14.4 million in the previous year.
> 
> Market cap of $1044m and -14% ROE, great business!  This freight train has crashed and the lemmings who lined up to buy it at $40+ are now feeling the pain of a speculative swan dive.  Herd behaviour in the market was the only reason XRO had such a stratospheric market valuation, pure spec stock. It was trading at $15 last Oct and that's probably where it belongs now, at best.




Market cap is $4.4B actually.

Did you read this link?

http://brontecapital.blogspot.com.au/2014/01/xero-and-precious-petals-of-new-zealand.html

Dones't change the fact that it's expensive and priced for A LOT of growth for a long time, but it changed my perspective somewhat.


----------



## Klogg (4 April 2014)

skc said:


> Market cap is $4.4B actually.
> 
> Did you read this link?
> 
> ...




After reading his blog entry on Xero (the entries on Herbalife are also worth reading), I looked into it myself - now aiming to make the move from Reckon onto their platform in the next 3 months.

That said, as good as the software is and as much as I respect John Hempton and his blog entries, I can't see this being worth anywhere near the $4bn mark. 

What's more, I don't believe this to be tru either:


> If your fund manager had underperformed the index because they did not own market weight in Xero (ie all of them) and they have not explored the software extensively themselves fire them.




Investing in something that by all quantitative measures is in my opinion, overvalued, isn't what I would want my fund manager to do. But maybe I'm failing to see the true potential of the company...


----------



## FxTrader (4 April 2014)

skc said:


> Did you read this link?
> 
> http://brontecapital.blogspot.com.au/2014/01/xero-and-precious-petals-of-new-zealand.html
> 
> Dones't change the fact that it's expensive and priced for A LOT of growth for a long time, but it changed my perspective somewhat.



Hadn't seen it, thanks for the link but it's not considered analysis but rather another "I like the product so bought the stock" story while pouring scorn on fund mangers that did not jump on the bandwagon early.  I have read other reports on XRO and they do have ONE excellent cloud based accounting product.  To say they are priced for perfect execution would be an understatement.

I must confess a bias for investing in companies that actually make a profit though.  Trying to pick the next hit tech stock based on the future potential of their only product is a lottery game I don't like to play, especially at $40/share.  XRO may yet become the next Google of the accounting software world but I seriously doubt it at this stage.


----------



## skc (4 April 2014)

Klogg said:


> Investing in something that by all quantitative measures is in my opinion, overvalued, isn't what I would want my fund manager to do. But maybe I'm failing to see the true potential of the company...




I agree but I think the point was that they failed to realise the potential when it was $6, then they want to change the rules to make their performance look good.


----------



## peaceofmind (5 April 2014)

skc said:


> I agree but I think the point was that they failed to realise the potential when it was $6, then they want to change the rules to make their performance look good.




$4bn for a $50mil/annum revenue company? this is the most overvalued company on the history of the ASX..reminds me of the uranium bubble in the mid 2000s.


----------



## FxTrader (8 April 2014)

Klogg said:


> What's more, I don't believe this to be true either:
> 
> 
> > If your fund manager had underperformed the index because they did not own market weight in Xero (ie all of them) and they have not explored the software extensively themselves fire them.




The stampede out of spec tech continues as the hot air balloon that stocks like XRO were riding continues to deflate, down another 12% to $28.25 as I write this.

Did those fundies who should have been fired by investors for not speculating on XRO actually foresee this bloodbath?  Perhaps it was wise to stand aside after all when investing OPM.


----------



## peaceofmind (8 April 2014)

FxTrader said:


> The stampede out of spec tech continues as the hot air balloon that stocks like XRO were riding continues to deflate, down another 12% to $28.25 as I write this.
> 
> Did those fundies who should have been fired by investors for not speculating on XRO actually foresee this bloodbath?  Perhaps it was wise to stand aside after all when investing OPM.




ponzi schemes...


----------



## Ves (8 April 2014)

peaceofmind said:


> $4bn for a $50mil/annum revenue company? this is the most overvalued company on the history of the ASX..reminds me of the uranium bubble in the mid 2000s.



Annualised subscriptions are actually $93m per annum,  not $50m per annum.

Without commenting on the actual value,  it helps to start with the correct figures.


----------



## So_Cynical (8 April 2014)

FxTrader said:


> The stampede out of spec tech continues as the hot air balloon that stocks like XRO were riding continues to deflate, down another 12% to $28.25 as I write this.
> 
> Did those fundies who should have been fired by investors for not speculating on XRO actually foresee this bloodbath?  Perhaps it was wise to stand aside after all when investing OPM.




There's a stampede out of Tech? a Bloodbath? i created a Tech watchlist 6 weeks ago and the only stock to fall significantly is XRO, it was always going to pull back from such a stupid valuation.


----------



## skc (8 April 2014)

So_Cynical said:


> There's a stampede out of Tech? a Bloodbath? i created a Tech watchlist 6 weeks ago and the only stock to fall significantly is XRO, it was always going to pull back from such a stupid valuation.




There is a bit of a sell off amongst various names.

XRO, REA, SEK, TPM, IPP, MNW, MBE, FLN, UNS etc.

Then a few high PE stocks (which includes the names above) also been heading down... 

MFG, PTM, BTT, DNA, DMP, RHC, GEM, FOX, QUB etc.

So far the damage is pretty localised so the broader market is barely feeling it... but over-valued, over-hyped stocks are always there in a bull market, so the question is whether a deflation of these names signify the bull coming to an end.


----------



## tinhat (8 April 2014)

skc said:


> There is a bit of a sell off amongst various names.
> 
> XRO, REA, SEK, TPM, IPP, MNW, MBE, FLN, UNS etc.
> 
> ...




Just the froth blowing off the "tech stocks", the listed wealth management financials and some of the defensive health stocks IMHO. How many of those stocks are still a good healthy margin above their 200 day MA? A good healthy correction. Perhaps a change in the cycle too in certain sectors is happening too which is why the broader market isn't feeling it (materials, industrials).


----------



## FxTrader (8 April 2014)

So_Cynical said:


> There's a stampede out of Tech? a Bloodbath? i created a Tech watchlist 6 weeks ago and the only stock to fall significantly is XRO, it was always going to pull back from such a stupid valuation.



Just working from a subset of SKCs list (all from recent highs)...

XRO -32% 
REA -13.6%
TPM -11.7%
FLN -29%
IPP -33% 

What exactly do you consider a significant fall then?  All these stock's were on "stupid valuations" as are most in the sector and have been for some time as partially evidenced by their steep falls.  I call it a stampede, call it what you like.


----------



## robusta (9 April 2014)

FxTrader said:


> Just working from a subset of SKCs list (all from recent highs)...
> 
> XRO -32%
> REA -13.6%
> ...




Maybe a totally different perspective and timeframe but I would call it opportunity. I hold IPP and picked up a small parcel of ICQ today...


----------



## notting (9 April 2014)

Social media 'froth off' global ETF chart retracement -





Volume comes in as it hits the technical retracement level


----------



## Klogg (9 April 2014)

robusta said:


> Maybe a totally different perspective and timeframe but I would call it opportunity. I hold IPP and picked up a small parcel of ICQ today...




Robusta,

I can't find a valuation technique of any kind that justifies the current price unless you make some very generous assumptions - and that's after the recent hammering it has taken.

Not sure if you're in XRO, but if you are, what are you basing this investment on?

Thanks.


----------



## notting (9 April 2014)

Well here's a sensational model that has grown it's customer base phenomenally over the past 2 years or so.
Just tremendous until you realize that it is losing money on every customer it has.:blover:
The more customers the bigger the losses! 
So Guess it depends on whether you are a bottom line or a top line kind of guy.
Growth v's Profit.
They will do very well if they can continue to grab market share as a sale pitch to shareholders.
 They being - the ones paying themselves to run it.:22_yikes:


----------



## DJG (9 April 2014)

When I questioned Xero (management). I asked basically their view on increasing prices to eventually turn customers into not just customers, but revenue earning customers.

Essentially they didn't agree with my assumption that they needed to increase prices in order to become profitable. They did later mention though that it is an option to increase ARPU (average revenue per user) and is a possible tactic in the SaaS playbook. "There focus is still on customer growth rather than rapidly heading to break-even" - As said by them. - This was in May 2013.

How long can this sustainably continue and how long will this line of credit last before they run dry of cash? I'd also be weary if customers would be willing to cop price increases.


----------



## robusta (9 April 2014)

Klogg said:


> Robusta,
> 
> I can't find a valuation technique of any kind that justifies the current price unless you make some very generous assumptions - and that's after the recent hammering it has taken.
> 
> ...




Hi Klogg

No I don't have any XRO and like you I have trouble finding a reasonable valuation... If I thought they could become the clear market leader worldwide... maybe but how can anyone be sure the competition let them take the lead?


----------



## Ves (9 April 2014)

Klogg said:


> I can't find a valuation technique of any kind that justifies the current price unless you make some very generous assumptions - and that's after the recent hammering it has taken.



Happy to explore this one.   I admit I was very hasty at making a judgment on this company earlier in the thread.

Ignoring share price for a minute,  the business model looks really top notch to me.   Recurring revenue combined with customer capitivity,  no real competition in sight at the moment  (first mover advantage at least) and a  low capital model with returns compounding with each customer added.

Put it this way each customer they add costs them less and less to maintain,  to a point where returns rapidly increase when critical mass is reached - why do you think they are chasing customer growth rather than profitability initially?   Because once they are captured they don't cost much to maintain,   you can strip a lot of the marketing and sales teams out of the business and focus on cost management and margin efficiency.   They are really throwing themselves at the long-term opportunity whilst the competition is twiddling their thumbs and sticking to the old-world (non cloud approach to accounting software).

If they end up with 1 million customers (which is their initial goal) the competition will find it hard to claw these off them and there will be plenty of opportunities to cross-sell and diversify into other revenue streams.  

With $100m of revenue they do not look that far off being profitable if you strip away of the staff costs they are carrying to grow fast.  

How much revenue do you think 1 million customers will net them?  Do you not think they can achieve this number, perhaps?  Do you think pricing will be static forever?  Yes management have not indicated that they will rise prices in the near future,  but when they have a captive audience and achieved their initial target goals they will consider it.    What margins do you believe they will be able to maintain if and when they have reached their target customer base?   (because that's a massive part of the assumptions in XRO's valuation,  and my impression is that these are being under-estimated in this thread)   How many variable costs are in this business currently?   If it was not trying to grow what does the P & L look like?

And remember,  they have $210m  cash.  How long will that last at the current rate of cash burn?  Will this accelerate or decline in the medium term?

Keep in mind that Intuit's market cap is $20B.   If this company becomes a world leader $4B is chicken feed.  At the moment that is still a "big if" but the probabilities are starting to grow a little with each report.


----------



## Klogg (9 April 2014)

@Ves - thanks for the response.

In regards to competition, there is also Quickbooks online from Intuit. I've used Xero, but not Quickbooks online, so I can't comment on the differences between the two.

As for customer growth, my reluctance here is that many of their target small-to-medium business customers are happy with their clunky, thick client software. I know it's not logical, but many of them can't be bothered 're-learning'. You see many of them unwilling to upgrade because they know the process, know the software provider and would take a very long time to convert (includes MYOB and Reckon's Quickbooks).
Of course, the reverse of this is will occur - once Xero get their customers, they WILL keep them.


I'm only playing out a possible scenario here, but it helps me think. 

-----------
Using the last set of accounts, 70.6m revenue ('Annualised Committed Monthly Revenue') is coming from ~211k customers. That's $335 per customer.

If you do reach the 1million customer mark, which is some 3-4years away, you hit approximately $335m in revenue. Let's add 20% for an increased price tag for the service, leaving you with ~400m.

I'll prefix this by admitting I haven't look at the cost base in detail - but assuming they achieve a 50% profit margin (I don't know if it's possible), which is very generous, you end up with $200m earnings.  At a $4bn market cap (which was much higher a few days ago), that's not exactly cheap - and that's years away!
----------

I realise that my assumptions around expenses could be way off, simply because I'm being somewhat lazy. But there are many generous assumptions in my scenario above and it still does not come off looking particularly cheap, after waiting years for growth.


Very interested in your thoughts!


----------



## DJG (9 April 2014)

Thoughts on them wanting to be bought out? Much like Silicone Valley stories? ie - Instagram for example. Of course Xero is actually generating money etc though.


----------



## skc (9 April 2014)

Klogg said:


> Using the last set of accounts, 70.6m revenue ('Annualised Committed Monthly Revenue') is coming from ~211k customers. That's $335 per customer.
> 
> If you do reach the 1million customer mark, which is some 3-4years away, you hit approximately $335m in revenue. Let's add 20% for an increased price tag for the service, leaving you with ~400m.
> 
> I'll prefix this by admitting I haven't look at the cost base in detail - but assuming they achieve a 50% profit margin (I don't know if it's possible), which is very generous, you end up with $200m earnings.  At a $4bn market cap (which was much higher a few days ago), that's not exactly cheap - and that's years away!




The latest annoucement has them with 284k current customers @ annualised revenue of $93m, that's still $330 per customer unchanged. They are planning to grow customers at ~80% per year. So they will get to 1m customers in a bit over 2 years if things go according to plan. 

What we can't see yet, however, is the scale benefits. On 31 Mar 2014, head count is 758 serving 284k customers... so 1 staff per 375 customers. On 31 Mar 2013, that ratio is 410. Another way to look at it... annualised revenue / staff = $122.7k for XRO in 2014, $135k in 2013. Intuit has $4.17B revenue and 8200 employees, or about $508k / staff. So XRO is going backwards on that measure and is no where near Intuit. I think a fair bit of that headcount is to acquire new customers and go to battle in the USA, so it's a bit hard to draw conclusions on it. 

At market cap of $4B, with 10-15% growth, they only need ~$200m "underlying" earnings to justify that. 3 million odd customers should do the trick. And that's probably only 3-5 years away, IF they maintain current growth.

XRO has probably won in NZ and looking likely to win in Australia, but these are tiny markets and won't support 3m paying customers. The biggest issue I see is that existing players in the US will not sit there idle when their market share falls. They may have dropped the ball in fringe markets like NZ / Aust, but if they are not shoring up their major market now with innovation (i.e. look at what XRO is doing and copy it) then they are not doing their job.


----------



## Ves (10 April 2014)

Thanks SKC,   that all seems reasonable enough to me  (a viable scenario to consider at the very least).

Klogg,   I believe you might be overlooking something in the business / marketing model of XRO that may help you.   Xero is fairly revolutionary in the accounting industry in that it changes the relationship between the accounting firm and the client.  It changes the way that information is collated and exchanged between the two parties.  I believe that you need to look at it in this fashion - most of the transactions on the client side are automated within it,  from quarter to quarter, year to year.    It is both more efficient for the client and the accountant at the same time.   They are creating a win-win situation,  most unlike most of what is currently on the market in my experience.

The accounting firms themselves are the marketing target.   "Hey,  go get your client to use this new software,  it will greatly improve the efficiency of your firm and their businesses." Look at some of the recent announcements of alliances they are making with some of the bigger accounting firms.    That appears,  from their experience,  to be much more successful than marketing direct to small businesses and hoping they will sign on without the nudging of a trusted adviser like their accountant.    Some of the other big firms do this,  but not on the level as Xero,  and certainly not in a way so automated.  

As SKC said the US and European / UK expansion and its success will be crucial in the current market valuation of Xero being justified in the long-term.


----------



## McLovin (10 April 2014)

skc said:
			
		

> They may have dropped the ball in fringe markets like NZ / Aust, but if they are not shoring up their major market now with innovation (i.e. look at what XRO is doing and copy it) then they are not doing their job.




Nail meet head.

Sticky customers suit the incumbent, not the upstart. They have probably been a bit blindsided by how quickly XRO has taken over AU/NZ. I doubt the response will be the same in their core markets.


----------



## peaceofmind (11 April 2014)

McLovin said:


> Nail meet head.
> 
> Sticky customers suit the incumbent, not the upstart. They have probably been a bit blindsided by how quickly XRO has taken over AU/NZ. I doubt the response will be the same in their core markets.




i get max steady state earnings at around $50-100m per annum. I have have included only medium success in the USA due to Intuit and other future competitors.

applying a 8-9 p/e to a steady state earnings company, i get valuations between $400 to $800m. Present value is about $300 to $600m as that steady state earnings is 3 years away+

Its current market value is $3600m which is 12x to 6x where it should be. 

One of the most overvalued companies on the ASX...

its only worth about $2 or $3 per share if u factor in future dilutions...


----------



## peaceofmind (14 April 2014)

still going down
fair value a lot lower. closer to $5-10 than $30. as per my above post.


----------



## LockNLoad (12 May 2014)

Interesting article on Xero: 

http://www.prospective-investments.com/disrupting-a-multi-billion-dollar-industry/


----------



## McCoy Pauley (13 May 2014)

I saw a demonstration of Xero's software last week.  I came away very impressed with the power of the software.  The sales manager undertaking the demonstration stressed how cheap the software is to license.  My uneducated view is that XRO is effectively buying market share through loss-leading and as subscriptions come up for renewal either after 12 months or a longer time-frame, XRO will be counting on the stickiness of subscribers to slowly increase licence/subscription fees, akin to the proverbial frog in the slowly boiling water.


----------



## peter2 (17 April 2017)

After being in the wilderness for three years, XRO is re-appearing on the break-out traders radar.


----------



## AlwaysBeClosing (18 April 2017)

That's a really interesting chart, great comparison - how many applications/developers is it measured against?  How are their share prices affected exactly?  Absolute newbie who's been dipping his toes the past few days.


----------



## greggles (7 May 2018)

peter2 said:


> After being in the wilderness for three years, XRO is re-appearing on the break-out traders radar.




Good call. One year on and Xero has doubled in price and has been hitting new highs almost daily for the last month. An outstanding performer.


----------



## Knobby22 (30 August 2018)

I,'ve picked this one due to its great growth, great chart and product. This report from someone I greatly respect caused me to buy recently and am already up 20%. Worth a read.

http://brontecapital.blogspot.com/2018/08/xero_1.html


----------



## bigdog (16 May 2019)

ASX Announcement this morning

Must be great news with INDICATED OPENING PRICE UP 3.11%







*Motley reported*
https://www.fool.com.au/2019/05/16/results-xero-posts-36-increase-in-revenue-to-nz552-8-million/
*Results: Xero posts 36% increase in revenue to NZ$552.8 million*
James Mickleboro | May 16, 2019

The *Xero Limited* (ASX: XRO) share price will be on watch this morning following the release of the business and accounting software company’s full year results.

In FY 2019 Xero posted operating revenue of NZ$552.8 million, which was an increase of 36% on the prior corresponding period. In constant currency this was an increase of 34% year on year.

This strong top line growth was driven by a 31% lift in total subscribers to 1.818 million and a small increase in average revenue per user to NZ$29.25.

According to the release, international net subscriber additions came in at 239,000 in FY 2019, which means they exceeded net subscriber additions from the ANZ region for the first time. The ANZ region accounted for 193,000 net subscriber additions during the 12 months.

The majority of the company’s international net subscriber additions came from the UK market, where the company reported a net increase of 151,000 subscribers. Over 100,000 of these came in the second half of the financial year.

This ultimately led to Xero posting a 32% increase in Annualised Monthly Recurring Revenue (AMRR) to NZ$638.2 million, positive free cash flow of $6.5 million, and a second half net profit after tax of $1.4 million. For the full year the company posted a net loss after tax of NZ$27.1 million.

Another key metric which continues to head in the right direction was Xero’s total subscriber lifetime value (LTV). This increased 36% year on year to NZ$4.4 billion, reflecting subscriber growth and gross margin improvement.

Xero’s CEO, Steve Vamos, appeared to be pleased with the company’s performance in FY 2019.

He said: “We’ve delivered a strong result with a number of major milestones for Xero including our first positive free cash flow result, and the UK adding more than 100,000 subscribers within a six-month period. Another important milestone was the positive bottom line result delivered in the second half, which demonstrates our improving profitability.”

He added: “As we head into FY20 and beyond, we’re making great progress towards our strategic priority of driving cloud accounting adoption globally. We have a genuine competitive edge by prioritising investment in growth, and partnering closely with accountants and bookkeepers, to deliver a human-centered technology experience for small business communities across the globe.”

Looking ahead, Xero intends to continue to focus on growing its global small business platform and maintains a preference for reinvesting the cash it generates to drive long-term shareholder value. It expects free cash flow in FY 2020 to be a similar proportion of total operating revenue to that reported in FY 2019.

Prior to today the Xero share price was up 36.5% over the last 12 months, just behind* Altium Limited* (ASX: ALU) with its 41% gain and *WiseTech Global Ltd* (ASX: WTC) with its 53% gain.

362


----------



## bigdog (16 May 2019)

The market loved the news; up 10.75%


----------



## Ferret (11 November 2020)

A quiet thread for a stock that has been performing very well.

Up 13% at one point today but seems to be fading now.

1st half results due out tomorrow.


----------



## sptrawler (11 November 2020)

It is interesting to read the full thread on this one, what a little ripper from N.Z.


----------



## Dona Ferentes (13 December 2020)

Ferret said:


> A quiet thread for a stock that has been performing very well.



and into the* S&P/ASX 50* Index – Effective 21 Dec, 2020
*Action ..... Code ...... Company *
Addition ... XRO ...... Xero Limited

The HY results in November had a noncommital Outlook







> Xero is a long-term oriented business with ambitions for high-growth. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in our operating environment. The continued uncertainty created by COVID-19 means it remains speculative to provide further commentary on our expected FY21 performance at this time



... this hasn't impaired performance. Some insto(s) sold down, another one (or two) bought in:

_Three year daily_


----------



## Knobby22 (13 December 2020)

Dona Ferentes said:


> and into the* S&P/ASX 50* Index – Effective 21 Dec, 2020
> *Action ..... Code ...... Company *
> Addition ... XRO ...... Xero Limited
> 
> ...



Excellent company. Great prospects.


----------



## qldfrog (14 December 2020)

Knobby22 said:


> Excellent company. Great prospects.



Arrrg ...was just thinking the same and going to buy a few long term shares: investor.
Last time i did that on msb,@Knobby22 was extatic as well and msb went within 2 days from $5 to $3.
We seem to share wrongly placed optimism

@Knobby22  and i should open the K-F short fund.
Short the hell out of Xero😊
So now, i am seriously scared of entering my order.
Will so pass this week but i believe xero is becoming a quasi mandatory tool in Australia due to the ever increasing red tape on small business.super.payg,bas,ias...
Now impossible to manage on a spreadsheet or simple tool as rules change every 3 months or so


----------



## Knobby22 (14 December 2020)

qldfrog said:


> Arrrg ...was just thinking the same and going to buy a few long term shares: investor.
> Last time i did that on msb,@Knobby22 was extatic as well and msb went within 2 days from $5 to $3.
> We seem to share wrongly placed optimism
> 
> ...



Doesn't have the thrill of a biotech waiting on USA government decisions which can be effected by big Pharma.

I would not be at all  confident that now is the time to buy after such an acceleration in price (so maybe that helps you execute) but the more the rules change, the more advantage this company has over old school accounting programs.


----------



## over9k (15 December 2020)

I have this - still holding it frog. You missed another 2% today. 

This & afterpay have been rippers.


----------



## over9k (17 December 2020)

Did you buy yet @qldfrog?


----------



## qldfrog (17 December 2020)

over9k said:


> View attachment 116473
> 
> 
> Did you buy yet @qldfrog?



No, for the reason mentioned above, will be one i will buy at the next crash.just be patient...xero is a direct consequence of red tape and a de facto mandatory purchase for sme and i do not see that reducing with the reset.


----------



## over9k (17 December 2020)

Dunno man, you reckon it'll pull back to this level (assuming you get the pullback you're looking for)?


----------



## qldfrog (17 December 2020)

over9k said:


> Dunno man, you reckon it'll pull back to this level (assuming you get the pullback you're looking for)?



I believe we will have s general pullback probably early next yet, i will jump then .
If not plenty others to go for


----------



## Dona Ferentes (12 November 2021)

"There are multiple drivers for cloud-based software adoption, including digitisation of tax compliance, innovation of financial services and an imperative for small businesses to prepare for the future”
- _Steve Vamos, CEO, Xero Ltd_


----------



## galumay (12 November 2021)

qldfrog said:


> but i believe xero is becoming a quasi mandatory tool in Australia




Accounting software yes, xero specifically, no. Lots of businesses & accountants prefer other solutions. Xero is very expensive, especially for the small & medium sector. At the enterprise level very few businesses or organisations use retail software like xero, they nearly all have bespoke accounting software.

Its a contrarian take, but i see xero as very exposed to disruption, its not difficult software to develop, xero are very expensive, and a cheaper option is very attractive to SMEs. Businesses rarely switch accounting software, which means most of xeros growth has to come from new businesses. 

There is a price i would be a buyer, but its multiples of that currently.


----------



## Dona Ferentes (12 May 2022)

_XRO is another one that has been up the stairs, and now coming down the escalator. Down 8%, now $79; back to 2019 pricing_

Acquisitions and continued subscriber growth have seen Xero push revenue above the $NZ1 billion ($910 million) mark for the first time.

Operating revenue had climbed 29 per cent to $NZ1.1 billion for the year to March 31 (c/f only 18% growth a year ago). Excluding acquisition, its organic growth rate was 24 per cent.

Xero’s annual monthly recurring revenue figure (a figure that extrapolates out how much revenue the business would make in a year if monthly recurring revenue was maintained) also topped the $NZ1 billion mark, climbing to $NZ1.23 billion, up 28 per cent on 2021.


----------



## Knobby22 (12 May 2022)

Dona Ferentes said:


> _XRO is another one that has been up the stairs, and now coming down the escalator. Down 8%, now $79; back to 2019 pricing_
> 
> Acquisitions and continued subscriber growth have seen Xero push revenue above the $NZ1 billion ($910 million) mark for the first time.
> 
> ...



Rising interest rates hurt these high growth companies.
What is it worth? That is the question. Also how much of their profit is international?
I will have to have a look. I did own previously some time ago but sold out.


----------



## Dona Ferentes (12 May 2022)

_cost creep. _

Xero said in its statement it anticipates operating costs to account for 80-85% of revenue over the full fiscal year, excluding acquisition integration costs, which will add about two percentage points to the total.


_Australia was key to the solid performance with revenue increasing 22% to $NZ224.9 million following the addition of 124,000 net subscribers. This brought its total to 1.24 subscribers Australia._
_NZ had a 13% rise in revenue to $NZ72 million after adding 34,000 net subscribers to reach a total of 480,000 subscribers. In a market saturated with existing subscribers that was a solid effort._
_In the UK Xero saw a 24% rise in revenue to $NZ132.8 million following the addition of 65,000 net subscribers. This took total subscribers in the UK to 785,000_
_But the North American business was sluggish; it delivered revenue growth of just 5% (or 14% in constant currency) $NZ30.1 million. Xero said it added 23,000 net subscribers to reach a total of 308,000 subscribers. The company said it continues to focus on developing the partner channel in North America and signed with a number of US and Canadian accounting firms to make Xero a preferred solution for their practices._
_The rest of the world saw a 72% rise in revenues to just on $NZ46 million, with a 26,000 net increase in subscribers to 201,000_.


----------



## finicky (17 June 2022)

Gapped down 5.5% today on above average volume. All buyers over the last 2 years are down and last time shares were this low was the first month of recovery after the WuFlu. I think there's a reasonable chance this will plumb the low of March 2020 (i.e $55)

Not Held (yet)

Daily 3 Years


----------



## JohnDe (17 October 2022)

Still traveling down? Might have to find out how busy the accountants are.


----------



## JohnDe (10 November 2022)

A window or a well?



> *Xero half-year loss widens to $NZ16m, former Google president Sukhinder Singh Cassidy named new CEO*
> 
> Xero shares have dropped to a one-year low as the cloud accounting giant’s interim loss blew out to $NZ16m ($14.5m) and it surprised the market by naming a successor to chief executive Steve Vamos.
> 
> ...


----------



## JohnDe (11 November 2022)

Nice jump today 9.5%


----------

