Treasure Chest: Xero

Treasure Chest | 12:48 PM

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Xero.

By Mark Woodruff

Whose Idea Is It?

Citi

The subject:

Xero ((XRO))

Shares in accountancy software platform operator Xero seemed on their way to $200 in mid-2025.

At the start of the calendar the price had slumped close to $110. In August, less than two months ago, there was a temporary rally to $89-plus.

Today, those shares are trading below $60.

Citi regards Xero’s current share price as "an enhanced buying opportunity" ahead of the release of first-half results on November 12.

Recent share price weakness is attributed to concerns around a possible first-half miss, with a second-half earnings skew, a softer share price for US-listed QuickBooks owner Intuit and renewed fears around AI disruption.

To show its conviction, Citi has opened a 90-day “Upside Catalyst Watch”, with the first-half result seen as the key trigger to inject renewed upward momentum into the shares.

Strong top-line growth is anticipated, including from the company’s US payments platform, Melio, along with scope for FY27 margins to outperform through ongoing cost control.

Citi cuts its target for Xero to $91.55 from around $113 to largely reflect lower peer multiples and retains a Buy rating, noting the stock is trading on a free cash flow (FCF) yield of 6%.