XRO – Macquarie rates the stock as Neutral

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The company’s presentations have reinforced the various options for long-term growth. Macquarie expects investment will mirror the revenue outlook.

While the pandemic has had an impact on profitability in the small-medium enterprise sector the broker assesses Xero has managed this well. A top-quality product creates loyalty in the customer base and, in the broker’s view, enables long-term investment in the platform.

Cloud penetration remains well below 20% in most regions outside of Australasia and, hence, Macquarie foresees the company’s presence in new markets will provide a long runway for growth. Neutral rating retained. Target rises to $85 from $75.

Sector: Software & Services.

Target price is $85.00.Current Price is $92.65. Difference: ($7.65) – (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).

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