Macquarie observes Xero’s growth trajectory in North America has been equal to its key competitor’s product QuickBooks Online, with a 10-year lag.
Over the next 10 years the broker expects growth in North America for the company will either need to moderate or revenue per unit in the region will need to continue declining.
Although subscriber growth in Australasia is expected to remain robust over the next year Macquarie expects it will decline materially thereafter.
The broker reviews its current multiples and finds it hard to justify the current valuation, downgrading to Underperform from Neutral. Target is $130.
Sector: Software & Services.
Target price is $130.00.Current Price is $141.14. Difference: ($11.14) – (brackets indicate current price is over target). If XRO meets the Macquarie target it will return approximately -9% (excluding dividends, fees and charges – negative figures indicate an expected loss).
