XRO - Xero Limited

[oldblue]

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]

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

 

[skc]

Interesting article by John at Brontecapital on XRO.

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

 

[Klogg]

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]

 

[piggybank]

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]

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]

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]

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]

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.

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]

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]

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]

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]

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]

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]

$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]

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]

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]

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.

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]

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.