Coming off 52 week highs set in March, Xero shares (ASX: XRO) have taken a bit of a breather in the last last month, dropping 12.62%. With analysts consensus on the stock at $130 (8% upside from last close), we want to take a closer look at recent news that might help push interest higher.
In a significant move that signals both innovation and growth, Xero Ltd has committed to integrating generative artificial intelligence technology into its cloud-based accounting software services. This strategic step has caught the attention of Goldman Sachs analysts who have expressed confidence in Xero Ltd, putting Xero on their APAC Conviction list. The analysts expressed an appreciation for Xero’s forward looking approach, underpinning their upbeat outlook for the company with a bullish buy rating and an ambitious $152.00 price target. With the high mark on the street up at $159, there seems to be some love for the company from the analyst community.
Underpinning Xero’s optimistic market trajectory is the introduction of ‘Just Ask Xero’ or JAX, an AI companion designed to enhance the company’s service offerings. JAX is poised to revolutionise client interactions by automating tasks such as generating invoices and completing various accounting functions, embodying the cutting-edge synthesis of AI and cloud-based software.
Such innovations are indicative of Xero’s dedication to maintaining its competitive edge and delivering quality service to its clientele. The company’s embracement of generative AI technology solidifies its position as an industry leader, propelling it towards realising its goal of market expansion, particularly in the promising yet uncharted terrains of North America.
Founded in Wellington, New Zealand, in 2006, Xero has entrenched itself as an indispensable tool for small businesses, facilitating their financial processes with an intuitive cloud platform and has grown to a market cap of $18.25B. The reach of Xero’s services spans over 180 countries, streamlining accounting practices and championing efficiency from Australia and New Zealand to the economic landscapes of the UK and Singapore. Their robust international presence is coupled with an ambition to penetrate and redefine the North American accounting software market.
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However, the United States presents a unique set of challenges for Xero’s expansion plans. The US is characterised by a notoriously complex tax code that varies by state, requiring a highly adaptable and sophisticated software solution. Furthermore, the presence of heavyweights like Intuit poses formidable competition. Nonetheless, Xero’s ambition is staunch, and their endeavour to thrive in this competitive arena remains undeterred.
With Goldman Sachs’s, and others’ vote of confidence, we will have to see how Xero continues on its journey of innovation. For technical traders, the stock remains in an upward channel that began back in November, returning to it after the breakout in March. Having dipped below what is seen as a psychological level at $120 on Wednesday (down 1.45%), traders will be watching to see where the next level of support is. On a more fundamental level, earnings scheduled for May 22 will present the next set of numbers to digest.
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