In a significant development for Australian stocks, Xero Limited (ASX: XRO), a prominent player in cloud-based accounting software, has witnessed its shares climb 8.74% following the disclosure of its FY24 earnings. The company’s impressive performance was highlighted by a 75% increase in adjusted EBITDA, reaching NZ$527 million, coupled with a noteworthy 22% rise in revenue which now stands at NZ$1.7 billion.
The success of Xero Limited extends beyond mere revenue and EBITDA growth. The company boasts 4.16 million subscribers across New Zealand, Australia, and the UK. FY24 saw an 11% surge in subscribers, cementing Xero’s position within these crucial markets. Moreover, the average revenue per user (ARPU) stood firm at NZ$39.29, reflecting a robust monetization strategy.
The financial robustness of Xero is further underscored by its free cash flow figures, which soared to NZ$342 million in FY24. More striking is the cash flow margin which scaled up to 20%, a significant leap from the 7.3% margin in FY23. This impressive cashflow metric places Xero firmly within the Rule of 40 threshold, a benchmark indicating sound financial health for software companies.
Market analysts have taken notice of Xero’s remarkable financial results. Leading financial institutions such as UBS, Citi, and Goldman Sachs have all reiterated their Buy ratings on Xero stock, signalling strong confidence in the company’s trajectory. Citi analyst Siraj Ahmed, in particular, forecasts an 18% upside in XRO shares, suggesting a bright future ahead for the company.
The broader consensus on Xero stock echoes this optimism, with a Moderate Buy rating assigned based upon 10 recommendations. Among these, eight are Buy ratings, further cementing the favourable outlook for Xero. The consensus price target for Xero shares stands at AU$145.39, which is 7.5% higher than current levels.
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Xero Limited’s financial achievements in FY24 have set a new benchmark for the company and have been well received by the market. With strong subscriber growth, significant gains in ARPU, a robust margin in free cash flow, and bullish sentiment from analysts, the future appears bright for Xero. XRO shares now trade very close to the high mark in the 52 week range, and there appears to be bullish sentiment building.
