Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Deutsche rates Xero a 'sell' with target price of $18.90

Deutsche Bank rates Xero a 'sell' with target price of $18.90/share

By Suze Metherell

Aug. 20 (BusinessDesk) - Shares of Xero, the cloud-based accounting software firm, are overvalued on US growth prospects and have been rated a 'sell' by Deutsche Bank as it initiates coverage of the company.

The investment bank, which part owns Craigs Investment Partners in New Zealand, gave the Wellington-based company a target share price of $18.90. Shares of Xero recently traded at $23.25, well below its March record of $45.99. It last traded below $20 in October last year.

Globally tech stocks have pared gains made early in the year and the NZX Sci-tech Index, which includes Xero, bio-tech company Pacific Edge, BLIS Technologies and Windflow Technology, has fallen some 28 percent since January as investors questioned high valuations relative to earnings.

In a note "Too much blue sky baked in" analysts Stephen Ridgewell and Joshua Dale say the "market is pricing in a faster ramp up in US sales than is likely and that the share price is likely to de-rate" to $18.90 on a discounted cash flow basis. The company needs two to three more years to build its growth engine in the US, they said.

The Wellington-based company wants a million customers, and is targeting growth in the US where it sees the potential to take market share of an estimate 29 million small to medium sized business owners. According to chief executive Rod Drury's annual general meeting presentation in July, the company has 334,000 customers worldwide, two-thirds of which were in Australia and New Zealand, and 18,000 in North America.

Banking fragmentation and the complex tax and state system in the US was a technical hurdle the company had to surmount, but more importantly competition from incumbent Intuit meant Xero would take several years to build momentum, the analysts said. Xero needed to build a product suite which matched Intuit's own offerings, incorporating tax management as well as catering for the prevalence of cheques in the market.

Xero was on track to take market share in Australia and New Zealand over the next two to three years, and was gaining ground in the UK but needed banks to allow for direct data access, Ridgewell and Dale.

The stock is rated an average of 'hold', based on five analysts as surveyed by Reuters, with a median price target of $21.75.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news