Xro - xero

[Snow Leopard]

I thought this was quite interesting too:

http://www.stuff.co.nz/business/industries/8595948/Xero-chases-talent-with-10-000-lure

Xero offering to pay a bonus of up to $10k to software developers IF they skip a recruitment agency and land a job with the company direct.

Other interesting points from the article:

Hubbard (Xero's Human resources director) said it had 25 vacancies for developers on its books in Wellington alone.

& Xero now employed four people to scour job boards and social media such as LinkedIn and Twitter, scouting for talent.

Recruitment agencies charge companies a significant sum of money when one of their candidates is accepted. It used to be 15% of the candidates first year salary.

Given the shortage of able programmers then this probably saves them money and also increases the number of candidates they get.

Best Wishes
Paper Tiger

[Stranger_Danger]

I know how you feel. I am starting to regret now selling a big clump in the $11's. But I can't make myself buy back in. I will just let the rest go to its conclusion...whatever that may be.

Its a weird feeling when you sell something but the next day the remaining portfolio has increased to the same value...

I remember that feeling well. In 1999, and 2006.

[lastmoa]

Recruitment agencies charge companies a significant sum of money when one of their candidates is accepted. It used to be 15% of the candidates first year salary.

Given the shortage of able programmers then this probably saves them money and also increases the number of candidates they get.

Best Wishes
Paper Tiger


Yep, the recruitment agents tend to hang around for their handouts as long as possible. I know this industry well as sometimes had to use them in contracts I did overseas. Always better to organise direct as many recruiters talk the jargon but don't know difference between Unix/Windows/Linux or Sys Admin/Helpdesk, etc. Much better Xero doing things this way, for all, including bottom line.

[Huskeez]

Grr missed a few buses this week (pretty much all of them)

[winner69]

I doubt whether XRO shareprice will ever collapse

[PlatnuM195]

Would have thought there would be some profit taking now but nope, still going strong. Then again, I guess you'd need to contemplate where to invest those profits.

[Toasty]

Grr missed a few buses this week (pretty much all of them)

I know the feeling. Been watching DIL spiral out of my comfort zone. XRO is not really explainable from my point of view. Even SNK I don't get but I have the feeling that I am going to miss out there too.

[Huskeez]

Haha yeah luckily for us if you miss one bus, theres always another one on the way. I brought into xro @ $10 and sold at $11 and thought to myself .. phheww that was lucky.... nekk minit

[zs_cecil]

I guess it might be possible for the company to split the stock if the rise continues. Maybe 10 for 1? Would anyone like to have a guess?

[zs_cecil]

That would give it 2.2 billion shares after the SPP is finished. I somehow doubt that will happen...

Ah, true... That 's far too many shares...

[zs_cecil]

Sorry, I was thinking this is the SNK thread!

10x XRO would mean 1.17B shares. Maybe a 5 for 1?

I wasn`t paying attention to the correct share numbers either. :)

[Toasty]

$14 up. Not sure that the $1 increments are the right way to look at this now... Maybe every $5 I will get excited. Yes, dangerous thinking I know.

The trouble with the latest run on certain stocks (DIL, XRO, RYM etc) is that it ruins the appeal of more traditional slower moving success stories. For me anyway. I know one shouldn't hang out for get rich quick stories but every so often it seems to actually happen...

[Toasty]

If it went to $5 I would probably have a heart attack

[JohnnyTheHorse]

$14 up. Not sure that the $1 increments are the right way to look at this now... Maybe every $5 I will get excited. Yes, dangerous thinking I know.

The trouble with the latest run on certain stocks (DIL, XRO, RYM etc) is that it ruins the appeal of more traditional slower moving success stories. For me anyway. I know one shouldn't hang out for get rich quick stories but every so often it seems to actually happen...

Don't get too excited. Some of the talk on this thread is clearly bubble and irrational exuberance talk. This stock is way out of control. People are being blinded by the price increases and haven't stopped to look at the fundamentals. Take a look:

Revenue (Year ended March 2013: NZ$39 Mil
Market Cap: ~$1.65 Billion

Price/Sale Ratio = 42

What is wrong with a P/S of 42 you say? Everything. Although it's a bit chalk and cheese, DIL is sitting on a P/S of around 13. A high growth stock like Xero can have a P/S of up to around 20 before it starts getting considered outrageously priced.

At these prices, avoid this stock like the plague. You will get burned. When this bull market comes to an end (an it will), massively overpriced stocks like Xero are going to get hit very hard. And just because there's all this talk of money coming in from US investors doesn't mean it is smart money. Big institutions from the US get irraional during bull markets like this too...

[Toasty]

Don't get too excited. Some of the talk on this thread is clearly bubble and irrational exuberance talk. This stock is way out of control. People are being blinded by the price increases and haven't stopped to look at the fundamentals. .

Point taken, but I have never stopped being paranoid about the price on this one. Everything about its meteoric rise sets off alarm bells. But every so often its nice just to watch it happen. I think most of the commentators here see the risk but whether the wider market does...? Who knows...

Sparky. If I had a cat it would be stuffed to the gills on caviar and champagne( or whatever it is cats eat) with the profits that I have booked. Still got a chunk riding though so it would be nice to keep that as well. The NTL that Moosie made me buy is not exactly keeping me in the lifestyle that XRO made me accustomed to...

[Dentie]

Point taken, but I have never stopped being paranoid about the price on this one. Everything about its meteoric rise sets off alarm bells. But every so often its nice just to watch it happen. I think most of the commentators here see the risk but whether the wider market does...? Who knows...

Sparky. If I had a cat it would be stuffed to the gills on caviar and champagne( or whatever it is cats eat) with the profits that I have booked. Still got a chunk riding though so it would be nice to keep that as well. The NTL that Moosie made me buy is not exactly keeping me in the lifestyle that XRO made me accustomed to...

Toasty, can you help me with my ongoing education please...

My previous posts verify my humble analysis (Fudamental and technical) telling me that XRO's share price (5 years to get to $7 and then 5 months for the last $7) is not being supported by any logical underlying assets or other intrinsic value .... unlike say, RYM. But I am obviously missing something.

Given it appears you have/had a stack of XRO (& my sincere congrats on that), can you whisper to me what gave you the confidence to buy & continue holding? How did you analyse this stock? I am a very keen learner in the stockmarket and would cherish some of your wisdom.

Thanks in anticipation

[Toasty]

and would cherish some of your wisdom.



I am counting on that being the first time that someone has said that to me without being sarcastic.

To be perfectly honest I really just bought into the whole story surrounding Xero and the fact that Rod has a solid track record with this sort of thing. I have met him and the thing that impressed me is that he has never doubted that he was going to be successful in any of his ventures. He is very focussed and is actually a nice guy in person. It is true though that he never misses an opportunity to get his view in. Which I support given that he is supporting his vision for his company. I don't believe though that there is any animosity here. He is simply playing the game as he sees it and everybody playing are big boys with resonably thick skin.

I panicked a bit in the early days but as the price came up I sold in small lots to get my initial investment back and get a bit of profit along the way and then a big bit recently at the mid $11's.

I just like the fact that it is a tangible offering (accounting software) and not too hard to understand, I don't get SNK at all for instance and it has a practicaly unlimited field to play in. SMEs, how big is this market.

I see it as incredibly risky especially as it seems to be driven by emotion and pretty much unmeasurable by any market standard but if a NASDAQ listing comes into play at some point who knows where it might go.

No wisdom here just a big chunk of luck to be fair. Hope that helps.

[winner69]

Following on from hoops fund managers chats over drinks -


Jeez that XRO done well for us lately

Yes haven't they .... didn't have a clue who they were or what they did until the got into the 50 and we had to buy some

Yep me too .... couldn't afford to be out of step with the market could we

Doesn't seem right holding so many when they don't even make a profit

And heck they are priced at 20 times sales

Buit just as well for indices otherwise we would have missed out - at least our investors think we are pretty smart

Way its going up at the next reweighting will have to buy even more .... heck even more invested in a loss making venture

One of early mentors said never never never speculate with other peoples money on a dream of one person but I keep telling myself the times have changed

Just as well for the index eh .... gives you a chance to do a bit of speculation eh

Yep - if it wasn't in the index mandate would not have allowed me to buy XRO

Easy game this looking after peoples money eh .... hardest part of the job is convincing people we are gurus

What sort of car you going to upgrade with this years bonus

Sipping champagne at the French Café over lunch

'That XRO going great guns still. Be in the Top 10 soon"

'Yep I had to buy some more as was afraid I wouldn't be matching the index'

"Heck that last report aid they will never make any money .... what are we gurus meant to do .... buy more of course'

'Did you know that Joe couldn't buy for the Kiwisaver Fund he manages .... mandated not to speculate on loss making companies and one mans dream'

He a loser that Joe ... probably slaving away over his quant models trying to get that bit alpha'

And here are we, gurus together, lapping it up and planning to spend our big bonus's this year buying thiongs like XRO because they are in the index'

'At this rate they be bigger than that #1 contender Ryman and maybe as big as Fletchers - at least we will able to say I told you so. We are guru's eh"

What does this XRO really do anyway mate'

'Cheers ... another bottle please Simon (Wright) and make sure you get some more in for next week'

[Beagle]

Bigger fool theory, never seen a finer example. Zero profits, excuse the pun and Zero chance of other competitiors not moving in on this cloud accounting if indeed it ever proves to be a profitable venture.

There will be tears, my 2 cents.

[icekiwi]

well, I feel a bit foolish having completely sold out at the 10.xx mark. Probably should have sold down in chunks.

[Dentie]

I am counting on that being the first time that someone has said that to me without being sarcastic.

To be perfectly honest I really just bought into the whole story surrounding Xero and the fact that Rod has a solid track record with this sort of thing. I have met him and the thing that impressed me is that he has never doubted that he was going to be successful in any of his ventures. He is very focussed and is actually a nice guy in person. It is true though that he never misses an opportunity to get his view in. Which I support given that he is supporting his vision for his company. I don't believe though that there is any animosity here. He is simply playing the game as he sees it and everybody playing are big boys with resonably thick skin.

I panicked a bit in the early days but as the price came up I sold in small lots to get my initial investment back and get a bit of profit along the way and then a big bit recently at the mid $11's.

I just like the fact that it is a tangible offering (accounting software) and not too hard to understand, I don't get SNK at all for instance and it has a practicaly unlimited field to play in. SMEs, how big is this market.

I see it as incredibly risky especially as it seems to be driven by emotion and pretty much unmeasurable by any market standard but if a NASDAQ listing comes into play at some point who knows where it might go.

No wisdom here just a big chunk of luck to be fair. Hope that helps.

No, no sarcasm....just trying to learn.

I appreciate your honesty and agree with your sentiments - especially about it being an incredible risk. Nothing adds up for me here - hence why I asked.

Thanks again Toasty and best wishes.

[lastmoa]

Don't get too excited. Some of the talk on this thread is clearly bubble and irrational exuberance talk. This stock is way out of control. People are being blinded by the price increases and haven't stopped to look at the fundamentals. Take a look:

Revenue (Year ended March 2013: NZ$39 Mil
Market Cap: ~$1.65 Billion

Price/Sale Ratio = 42

What is wrong with a P/S of 42 you say? Everything. Although it's a bit chalk and cheese, DIL is sitting on a P/S of around 13. A high growth stock like Xero can have a P/S of up to around 20 before it starts getting considered outrageously priced.

At these prices, avoid this stock like the plague. You will get burned. When this bull market comes to an end (an it will), massively overpriced stocks like Xero are going to get hit very hard. And just because there's all this talk of money coming in from US investors doesn't mean it is smart money. Big institutions from the US get irraional during bull markets like this too...

Hi Johhny. Thanks for the info. Agree that at current prices I see DIL, which is more proven, as the cheaper of the two. Saying that, I will choose to be devils advocate of most people on this thread and say that Xero is potentially cheap at these prices IF Rob and his team continue to deliver on their (somewhat conservative)aim of having 1million customers. You can look purely at fundamentals but have to also view them trending-wise and also see the global story that is building. Sure it has big risk, as the incumbents will want to move solidly into this space, but from what I see his conservative aim has allowed for that somewhat. Just my two cents. I am not trying to sound like a bull on this stock but Xero's story so far has given me no reason to doubt the goal they will meet. Add to that a NASDAQ listing (it will come), global exposure, market cap in NZ$'s and appearing kinda cheap compared to other IT listings, and maybe, just maybe, this train is only just starting. If it's too risky for the average investor, simple .. stay away. Totally understand why people could think that. 8-)

[CJ]

Just putting it out there but my concern with a NASDAQ listing is it will value this at 20x annualised revenue - which is much higher than traditional stocks are valued at. XRO is well above this which is why I got out (some what depressingly in the high $7s)

[lastmoa]

Just putting it out there but my concern with a NASDAQ listing is it will value this at 20x annualised revenue - which is much higher than traditional stocks are valued at. XRO is well above this which is why I got out (some what depressingly in the high $7s)

Define 'traditional.' This is not a conservative play like Coca-Cola or suchlike. Whenever Xero goes on the NASDAQ the fundamentals may not be 20x. Time will tell.

[Blendy]

well, I feel a bit foolish having completely sold out at the 10.xx mark. Probably should have sold down in chunks.

You were not foolish - at that price, none of us here could justify the price so you sensibly cashed up and I bet you were totally delighted and amazed with that price! That it has gone higher still is still a mystery to me.

[CJ]

Define 'traditional.' This is not a conservative play like Coca-Cola or suchlike. Whenever Xero goes on the NASDAQ the fundamentals may not be 20x. Time will tell.That was my point. Over simplifying but Traditional companies trade on P/E ratios. High growth tech companies trade on P/R ratios. But even then, XRO P/R ratio is looking high.

[777]

There was one gentleman, a Rockefeller I think, when asked why he was so rich, replied "I sold too early".

[JohnnyTheHorse]

Quarterly cashflow report:

https://www.nzx.com/files/attachments/174425.pdf

Quick, get your bid in!!! Don't waste time reading it, just get your bid in!!!

[tosspot]

seriously what the hell. Its like xero is in a parallel universe

[Toasty]

So do you think the NZ Taxi Federation is buying in on the advice of some of its members?

[Toasty]

This is quite spooky. Made 8X my take home pay this month. Maybe its time to retire. What could possibly go wrong? Now if some of those other lazy bastard stocks like SUM could pick up their game...?

[JohnnyTheHorse]

Jeez it's about time Xero hit $15, it took its time. I hope you listened to me telling you to get your bids in before! $20 here we come!!! :t_up:

[tosspot]

im speechless. how many here have held on to these since before new years.

[Toasty]

Yuk. A big glut of sellers at $15 to work through. Why can't they all pull their horns in so we can get on with the upward march. Why are they standing in the way?

[JohnnyTheHorse]

Yuk. A big glut of sellers at $15 to work through. Why can't they all pull their horns in so we can get on with the upward march. Why are they standing in the way?

They obviously don't believe that it's different this time. How foolish of them eh?

[POSSUM THE CAT]

Does this stock rely on The Greater Fool Theory?

[Toasty]

Does this stock rely on The Greater Fool Theory?

Not at all. All shareholders are people that carefully evaluated the risks and pitfalls and then bought it anyway...

[robbo24]

Never thought I would see something like this so early in my trading lifetime. Good to get it out of the way early so I can spot it easier next time and reap the rewards!

Lol - what characteristics will you look for Moose-o?

[Newman]

Does this stock rely on The Greater Fool Theory?

Trading volume is less than 200 thousand shares most days, or less than 0.2% of issued shares (117 m). I have never seen another company that its share price jumped 30% within 2 weeks and majority of share holders do not bother to sell. The depth shows that only 21000 shares are on the ask side. Xero is a company I could not understand.

[Novitiate]

Have been holding since $1.34. Have always intended to be a longterm holder (I like the product/strategy/people) but sold a few at $11.70 to take my original investment and a bit of profit off the table. Might do a bit more 'rebalancing' at these prices, but am happy to keep holding. This one's too tricky to get in and out of - and ....... you know ... it's different this time- a whole new paradigm... (gotta say it's feeling like it right now!). Signed, a very happy 'bigger fool'.

[Toasty]

Down 40 cents. NOOOOO!!! How can this be happening. They said it was different this time, a new paradigm. Wheres the window...ah crap I'm on the ground floor...

[zs_cecil]

It might be not a bad thing for this stock to be cool down a little. Some people need to take profit. Some people want to get on the bus with a little bargain in short term. Most of the people are doing nothing. all of them seem in harmony right now.

[Banksie]

I wonder how contagious this will be - I see DIL is dropping as well.

[GRIFFIN]

This must be what they term a healthy correction in a over heated stock or is it a way lot more than that.

[lastmoa]

$13.50 it is ;)

Watch the sellers start a-panicking! The Oz market isn't even open yet!

Pleased to see this shakeout/profit-taking in Xero. Would rather Xero be tracking upwards in similar fashion to Diligent.
I have taken my capital outlay of the table at $7's and see no reason to sell now. Story hasn't changed for me.

[Toasty]

Pleased to see this shakeout/profit-taking in Xero. Would rather Xero be tracking upwards in similar fashion to Diligent.
I have taken my capital outlay of the table at $7's and see no reason to sell now. Story hasn't changed for me.

I agree. There really hasn't been any story around the price movements that I can see. AGM should be coming up soon too so a chance to see where things really sit in terms of customer numbers, revenue and I am assuming...expected loss for the next financial year.

[lastmoa]

I am afraid of XRO because the unknowledgeable/momo crowd is controlling the SP, just like happened with gold this past month. When the selling starts, who knows where it will stop?

Do not fight a fool, because he will drag you down to his level and beat you with experience.

Moosie. There will always be the nervous investors that jump ship at the slightest downward pressure. Call them unknowledgeable, or whatever, but the shakeouts allow believers in. I am not blind to any spin that may come from Xero, or any other stock for the matter, but I do MY OWN research and back myself with this knowledge. I remember you said you acted and sold out of Xero on wrongful advice imho, but we all learn as we go and hindsight is a good thing. Time will tell. I wish you/us all the best with Snakk btw.

[Hoop]

Exhaustion http://www.sherv.net/cm/emoticons/sleep/being-tired.gif

[Toasty]

This on Stuff today. I bet they had the content of this article written years ago and were just waiting for the correction so they could publish it. Seems a bit too far reaching to have suddenly been decided upon just today...

http://www.stuff.co.nz/business/opinion-analysis/8619431/Xero-shares-take-a-hit-despite-no-news

[Blendy]

it's pretty tempting right now... or is that just the crazy talking??

[Beagle]

bubble bounce followed by the real collapse...

Commonly known as a dead cat bounce.
As an accountant of 30 years experience I see nothing mystical or majical about these guys and their software and as sales grow so too do their losses... Accounting software is a dime a dozen at any local Noel Leeming store or elsewhere and too top that off barriers to entry for cloud accounting software are not huge...

[lastmoa]

Commonly known as a dead cat bounce.
As an accountant of 30 years experience I see nothing mystical or majical about these guys and their software and as sales grow so too do their losses... Accounting software is a dime a dozen at any local Noel Leeming store or elsewhere...my 3 cents worth.

Do people still buy packaged software? Wow. 8-)

[Toasty]

Who said they were mystical or magical? I don't think anyone on this forum is in lala land regarding the risks with this company. Just my $15 worth $14.90, $14.50, $13.28.........

[Newman]

Why there were so many tiny trades at less than 20 shares?

[tosspot]

well I guess all the naysayers can be somewhat happy now. I reckon the next 2 days are crucial, they will dictate where the share will end up for the short future

[Toasty]

It's the Xero Smackdown! Holders of this stock should sell as fast as they can. There's only one way this baby's going and that's down! It'll be down 50% in the next 3 months. And even then it will still be overpriced!

You signed up to say that? You must be an NBR commentator. Maybe you should go back there.

[emearg]

You signed up to say that? You must be an NBR commentator. Maybe you should go back there.

Pity you didn't check the members join date before saying that. It would have had far more impact!

[lastmoa]

Bubble territory, and Xero is thy name. There ain't nothing wrong with warning people.

Geez, goes down a few percent in one day and suddenly all people are talking doom and gloom for not only Xero but everything that is in the SAAS space, including the coys that show a bottom line profit already. Did I miss something or did the NASDAQ crash last night?

[emearg]

Bubble territory, and Xero is thy name. There ain't nothing wrong with warning people.

With the incredible rise this stock has had over recent months a correction is hardly surprising. Nothing to get too stressed out about in my opinion. For now it still looks like a good product with excellent growth potential. If the share price halves, but gets back to $15 in a year that is hardly the end of the world for most holders I wouldn have thought? Most will still be making a killing.

I don't hold, nor do I intend to, so this is just my honest opinion.

[emearg]

Can users use Xero on Android and Apple devices? If not have they announced a plan to provide this service?

[Snow Leopard]

Despite the little drop today it still is:
worth 50% more than Mainfreight;
has revenue which is only 50% of MFT's profit.

Best Wishes
Paper Tiger

[zs_cecil]

Can users use Xero on Android and Apple devices? If not have they announced a plan to provide this service?

They have been available on android and apple for a while. I used Xero on Android several times.

[Novitiate]

From a week ago:

I guess the market answered my question. $13 Holy S%@t

from today:



Besides, holders are only down to $13.50. If they bought in a few years ago, they are still laughing.

.

.... absolutely .... and if they bought any time prior to a week ago, they're still in positive territory.

[CJ]

Besides, holders are only down to $13.50. If they bought in a few years ago, they are still laughing.it doubled in 3 months - those that bought 1 month ago are probably in profit. It rally only wiped out the last weeks gains.


Can users use Xero on Android and Apple devices? If not have they announced a plan to provide this service?yes. Has apps for both and the full website looks glorious on an iPad.

[lastmoa]

It's the Xero Smackdown! Holders of this stock should sell as fast as they can. There's only one way this baby's going and that's down! It'll be down 50% in the next 3 months. And even then it will still be overpriced!

Like Sparky, I would expect constructive comment on stocks on this website forum. That's why I, and many others, bother going to this site. If you have to say something in that tone at least show some intelligent justification for what you think. No use posting otherwise.

[Toasty]

Pity you didn't check the members join date before saying that. It would have had far more impact!

He may have joined at the end of last year but this was his first post. I stand by his "Tosser" status.

[emearg]

He may have joined at the end of last year but this was his first post. I stand by his "Tosser" status.

And I know of no reason to disagree.

Drive a Bentley? I know plenty of people that drive flash cars but only own 10% of them. I don't take financial advice from them....

[Toasty]

Well I do drive a Bentley, does that count?

Anyway, take a chill-pill, dude, I thought clowns were supposed to be jokers? Why don't you watch Willie Nielson's audition for the Hobbitt? It might take your mind off things.

http://www.youtube.com/watch?feature=player_=FTE5RYTT3Zo (http://www.youtube.com/watch?feature=player_embedded&v=FTE5RYTT3Zo)

careful. He does drive a bentley

http://www.trademe.co.nz/motors/used-cars/bentley/t/auction-583375689.htm

[lastmoa]

It's a free world, I'll say what I like. Anyway you should welcome all views in investing, if you want to make any money at it, and not just those that support your personal point of view or way of doing things. If you want to make any money off the market, then you need to understand it. All of it.

DJAB. No offence towards you, just expect some substance behind the post and not just a blatant opinion with no justification. If you think the stock is going to be down 50% in the next 3 months please enlighten me.
if you want to make any money off the market then you need to understand it. 8-)

[Snow Leopard]

Am I the only that got stopped out today? ... Surely a 8 plus per cent fall would stop you out of most stocks? ... Or am I - once again - doing it wrong?

Hopefully we all have our different ways of doing things, and if it works for you that is fine.

My first stop is currently (end of today) at $11.77. However given that I own zero Xero, it is a little theoretical :(.

Go with the flow &
Best Wishes
Paper Tiger

[Toasty]

I've been thinking, this isn't the right website for you DJAB. Perhaps you should discover the joys of sh@reinv3stornz.blogspot.com and a fine chap, who you would like very much called Darren Rickard, under a pseudonym called "Bongo". He even has a forum at www.sh@reinv3storforum.com (http://www.*************forum.com) where you can participate more fully. (replace @ with a and 3 with e due to autoblocking by moderators)

You should stop using the DJAB moniker as well - clearly you need "Bentley" as your user name.

Years ago, an individual, much more wealthy than you and I, in fact wealthier than 4.5m other New Zealanders, once said to me after I experienced a small setback in my life :

"Sparky, you need to understand something. There are a lot of f*ckwits out there. Everywhere you look, you can find f*ckwits. You need to live your life accordingly".

I have followed his advice to a tee over these last 3 years. I have profited enormously, both in a financial and personal sense from a f*ckwit free existence. And I don't intend to stop.

So please. Maybe this isn't the right website for you. Go spend time with Darren Rickard instead. Bentley and Bongo need each other.

Lol Sparky. Can't read that second attachment though.

[Toasty]

Wow, you're really arrogant aren't you? Who died and made you forum monitor? You don't own this place, buddy. Although given the frequency and style of your contributions here, I think you think you do. I'll contribute on the same terms here as everyone else does. That is when I like and as I like to. And if you don't like that, tough titties.

The frequency and style of Sparkys contributions are very much appreciated. Yours however...not so much.

[lastmoa]

Back to Xero and the NZ tech stocks.

Lack of buying support for Xero shares bodes poorly in the short term for Diligent as well (I hold DIL which was down almost 4% today). However, the fundamentals of Xero (the company) remain reasonably strong. They have big name shareholders who back the vision, loads of cash in the bank, an excited developer community, and an ecosystem of other SaaS companies and Xero add-on providers. Those are all positives which should see Xero battle on long enough to gain US market share - the holy grail for them.

In the short term, a sustained drop from Xero might also take the gloss off the very shortly listing SLI Systems, which like Xero is raising money to help grow over the next few years at the expense of profits.

I hear through the grapevine there has been strong takeup by institutions and the public of SLI's offering.

It would be a shame if it launched under a cloud due to a big dip in Xero.

Disc: Not applying for any SLI, holding DIL, not holding Xero.

Agree Sparky. I don't think I will participate in the SLI offering. Had a brief look at what they propose, and although I somewhat see potential here, I am trying to build holdings in others that I see more promise in. Plus I already have Xero, Diligent, PEB and couple of exciting Aust stock to keep on top of. Only 24hrs in a day. 8-)
Thanks for getting this board back on track. Think you ruffled DJAB which is not what we want to do. Don't want to waste my time wading thru personal abuse messages - achieves nothing. Like you all I want is constructive comment rather than some 'sky is falling' remark.

[RazorX]

Wow, you're really arrogant aren't you? Who died and made you forum monitor? You don't own this place, buddy. Although given the frequency and style of your contributions here, I think you think you do. I'll contribute on the same terms here as everyone else does. That is when I like and as I like to. And if you don't like that, tough titties.

The key word here is "contributions" Sparky contributes. Some agree with what he says, some don't. Personally I find his posts very interesting, informative and well thought out.

I agree with the other members who don't consider that you are actually contributing. (Reminds me of another member actually)

Anyways that not what I came here for. I wanted to put in my two pence on Xero. I don't hold it. (But I wish I did!)

I have been watching Xero for years because I am an accountant... so naturally interested in the product. I love it, recommend it to customers. However it has stayed out of my portfolio for one reason: It's making losses. My thoughts were that the SP would dally around until it actually turned a profit, at which time I'd reassess. I watched as it went through 2.50 thinking why? $5 why? $10 someones crazy. $15 yesterday the world has gone mad, someone is going to be burned (I actaully said that to my collegue yesterday) there's got to be a correction.

So my view is based mainly on TA. I havn't seen anything yet that changes by FA opinion of Xero. Yes they are doing well, but I like to see some profits being made. Don't want to see divis paid out of loans. Based on my understanding of TA and market psychology there was due to be a correction, and a fairly big one. I think the SP has gone up based primarily on excitment and emotion (Another reason I have stayed away from the stock). I'd 'expect' a correction to continue and if I was in this stock I'd be using Fib levels to see where it might find support, if I was planning to hold or looking to see if I should sell. Truth be told, had I bought the stock it would have been a trade not investment, and I would have sold out long ago.

Thumbs up to those of you who did well out of this, and we can only hope Xero isn't the next Rakon and leave those folks who bought at $15 high and dry.

[Edit: Just in case someone comes up with a great hindsight post comment - I have been having these thoughts for months, years even - they didn't pop into my head at 5pm today after looking at XRO's SP Ask the folks at work :) ]

[lastmoa]

The key word here is "contributions" Sparky contributes. Some agree with what he says, some don't. Personally I find his posts very interesting, informative and well thought out.

I agree with the other members who don't consider that you are actually contributing. (Reminds me of another member actually)

Anyways that not what I came here for. I wanted to put in my two pence on Xero. I don't hold it. (But I wish I did!)

I have been watching Xero for years because I am an accountant... so naturally interested in the product. I love it, recommend it to customers. However it has stayed out of my portfolio for one reason: It's making losses. My thoughts were that the SP would dally around until it actually turned a profit, at which time I'd reassess. I watched as it went through 2.50 thinking why? $5 why? $10 someones crazy. $15 yesterday the world has gone mad, someone is going to be burned (I actaully said that to my collegue yesterday) there's got to be a correction.

So my view is based mainly on TA. I havn't seen anything yet that changes by FA opinion of Xero. Yes they are doing well, but I like to see some profits being made. Don't want to see divis paid out of loans. Based on my understanding of TA and market psychology there was due to be a correction, and a fairly big one. I think the SP has gone up based primarily on excitment and emotion (Another reason I have stayed away from the stock). I'd 'expect' a correction to continue and if I was in this stock I'd be using Fib levels to see where it might find support, if I was planning to hold or looking to see if I should sell. Truth be told, had I bought the stock it would have been a trade not investment, and I would have sold out long ago.

Thumbs up to those of you who did well out of this, and we can only hope Xero isn't the next Rakon and leave those folks who bought at $15 high and dry.

[Edit: Just in case someone comes up with a great hindsight post comment - I have been having these thoughts for months, years even - they didn't pop into my head at 5pm today after looking at XRO's SP Ask the folks at work :) ]

RazorX - Thanks for your viewpoint. From what I can see for Xero to turn a profit it could turn off expansion in USA/Uk and pretty much everywhere outside of Australiasia and also stop hiring all new developers and supporting staff. It would then purely be directed competition to MYOB and of course I would expect it's market cap, and resultant SP, to be trimmed accordingly. Of note is that MYOB had a market cap of around $1.2 billion nearly 2 years ago.
I prefer the 'pedal to the metal' approach that Drury has taken (so it seems do Morgan and Thiel), and understand that all share investors have varying willingnesses towards risk. If Xero does achieve it's ambitious goal of 1 million customers before it burns through its cash hoard then full credit to them and congrats to the investors that backed the dream. If not, at least they stepped into the arena. Time will tell.

[Snow Leopard]

PT, how did you come up with that number? My was a gut "sharp rise / no info / take the money" sort of thing. Your logic? Much appreciated.

4486

So the black line is the XRO daily close for the last six months and the four beneath are 'Exponential Trailing Stops' for which the magic numbers are:
4% and 32 days
8% and 16 days
12% and 8 days
16% and 4 days

Instead of rising immediately to some % from the days action they move exponentially up towards their (moving) target.

With XRO attempting to break the Earths gravitational field recently these stops have:
got inverted - the 16% is higher than the 12% etc;
left reasonable room for manoeuvre for a bit of sanity (relatively speaking) such as today/yesterday.

The highest of the four is now sitting at $11.77.

Now if I had bought recently I would have a stop about 8% below my purchase price and would be watching carefully at open tomorrow.

Note I manually act on stop signals and I use a bit of FA/gut instinct/dice throws to decide which of the four to act on.

Best Wishes
Paper Tiger

[GRIFFIN]

I think if i had bought into XRO in recent weeks i would be very much in the nervous nellies camp.

[CJ]

I just checked the charts and Xro plummeted to levels not seen since 4 days ago!!!!.

With the US off today, it will be interesting to see how many more days of gains will be wiped off. ;)

[Jay]

Also did not mention that Xero (file://\\Xero) has not made a profit yet and did not really emphasize Dilligent is,
however both were mentioned as possible takeovers

[Toasty]

Is it fair to say that I have lost 100% on my investment ... because it dropped from 1400% to 1300%?

[Newman]

Rod Drury: Dear IRD: how to shave $1b from your $1.5b software spendup

http://www.nbr.co.nz/article/dear-ird-how-save-1-billion-ck-139462

If you choose to invest in Xero, you need to trust Rod Drury.

[Banksie]

Also did not mention that Xero (file://\\Xero) has not made a profit yet and did not really emphasize Dilligent is,
however both were mentioned as possible takeovers

Yeah they kind of glossed over the differences between the the two, but it was there.

In the year to date the Wellington-based company's stock has gained a whopping 80 per cent, valuing the business - which doubled revenue to $39 million in its last full year but is reinvesting for growth and is yet to turn a profit - at $1.5 billion.

New York-based Diligent, which has developed software used by company directors and tripled its annual profit in its last financial year, has seen a 32 per cent lift in its share price since January, driving its market capitalisation up to $607.4 million.

[Toasty]

Still big "international" purchases being placed this morning. Last one is $13.90. I would have thought that this implied some optimism. Seems an odd thing to do based on yesterdays performance. Gonna be an interesting morning.

[Silverlight]

Still big "international" purchases being placed this morning. Last one is $13.90. I would have thought that this implied some optimism. Seems an odd thing to do based on yesterdays performance. Gonna be an interesting morning.

Toasty the international trades are not "real" trades, they are just reprints of trades executed on the ASX yesterday.

[Newman]

Xero: A billion-dollar software company that had five years in stealth at the bottom of the planet

"Calling Xero a “global company that started in New Zealand,” Drury says he plans to list on a US stock exchange once it reaches $100 million in revenue, which he thinks will happen in the next couple of years. Having already experienced an acquisition with AfterMail, he wants more."

http://pandodaily.com/2013/05/01/xero-a-billion-dollar-software-company-that-had-five-years-in-stealth-at-the-bottom-of-the-planet/

[JohnnyTheHorse]

Any one out there like me who sold at or around $15 that is considering re-entry? Interested to here what you are looking for in terms of the share price, or patterns in trading before re-entering? Looks like it will go at least as low as $13 so for arguments sake a re-netry there would return you 15% more shares than you sold for no additional cost, that's the way I'm looking at it anyway. Not advocating buying bak in, just wanting to know peoples opinions, mainly of those in a similar situation to me.

Watch out, you'll be playing with fire. Stocks that have risen fast like Xero tend to fall even quicker. I would not have a set price in mind as this thing could realistically go back to $5-$7. Not saying there isn't good money to be made by re-entering, I'm just saying be VERY careful :)

Panic selling has certainly set in. $11.80 with few buyers in sight. I'm sure they'll build up though.

[Toasty]

Any one out there like me who sold at or around $15 that is considering re-entry? Interested to here what you are looking for in terms of the share price, or patterns in trading before re-entering? Looks like it will go at least as low as $13 so for arguments sake a re-netry there would return you 15% more shares than you sold for no additional cost, that's the way I'm looking at it anyway. Not advocating buying bak in, just wanting to know peoples opinions, mainly of those in a similar situation to me.

I am definitely looking at getting back in. Quite a big chunk sold at 11:50 a few weeks ago so happy I did that now but reinvesting certainly on the table.

[BIRMANBOY]

You are obviously employed by a finance company..so no doubt can be accepted as fact:)
Is it fair to say that I have lost 100% on my investment ... because it dropped from 1400% to 1300%?

[Newman]

The change was too fast. I was not able to place an order buying @$11.90.

[777]

There was support at $13 yesterday. Not there today.

[Huskeez]

Holy mother of medicine!

[tosspot]

its sure not pretty. I have a feeling $10 has a target painted on its back by the end of the week

[lastmoa]

FYI - latest Xero news release : http://www.stuff.co.nz/business/industries/8623971/Xero-brushes-off-23pc-share-fall

[BIRMANBOY]

Get a hold of yourselves........

http://www.homesforsaleinlascruces.com/files/tiny_mce/image_manager/site_elements/images/chickenlittle.jpg



Jeez, I'm gone half a day and look what you crazy animals do to the market!

[biker]

Some analysts described Xero's booming share price as being a bubble, but Drury said that did not apply to the business.

"What we are building is a solid annuity revenue stream and we are executing our plan to become a significant global company and we have got plenty of cash - so it doesn't really matter."

Momentum trading is great.......... until it isn't.........

[biker]

Great graphic. Love it!!



Get a hold of yourselves........

http://www.homesforsaleinlascruces.com/files/tiny_mce/image_manager/site_elements/images/chickenlittle.jpg

[CJ]

Jeez, I'm gone half a day and look what you crazy animals do to the market!I went for a quiet drive around the suburb of Hampton Downs yesterday (nice wide road with no traffic but very few houses ;) ) and came back to a see of Red on all my shares held.

[CJ]

FYI - latest Xero news release : http://www.stuff.co.nz/business/industries/8623971/Xero-brushes-off-23pc-share-fallHe is right in the sense they have enough cash in the bank to execute their strategy and/or cut costs to make their existing revenue stream profitable.

So the business in viable, the valuation of the shares is still up in the air

[blobbles]

Rod Drury: Dear IRD: how to shave $1b from your $1.5b software spendup

http://www.nbr.co.nz/article/dear-ird-how-save-1-billion-ck-139462

If you choose to invest in Xero, you need to trust Rod Drury.


Rods bang on with this. The Novopay debacle should teach everyone in government to shop locally. The specs were given to Talent2, an Australian company, who then outsourced to Indians. And they wonder why the system cost 100 million and will probably never work right?

I could have built the system over 3 years with about 5-6 mates, costing around $10 million. And it would have worked. This is after having a sneak peak at the specs and having worked in the education sector building software and in the finance sector doing the same. It is completely ridiculous and very insulting that our own government believes we do not have the skills or ability to develop big systems in NZ.

[CJ]

Quarterly cash outflow was $6.7m, annualised this is almost $27m3 years of cash reserves is heaps. In two years when they would need to start thinking about cash again, everyone will be in a far better position to judge how they are going.

[Newman]

The SP spiked soon after the cash flow anouncement (up $1 from memory). I dont think it was that which sent the SP down in the end.

The announcement on 19/4/2013 says "Based on current client demand for cloud-based accounting solutions, Deloitte
expect that by the end of its financial year approximately 2,000 ledgers will have been migrated to Xero's platform alone."

The financial year of Deloitte ends on May 31. If in the 42 days from April 19 2000 clients can be added from Deloitte alone it would be great. 2000*$500 p.a. = $1 m.

Today XERO said a revenue of $100m could be achieved in 2 years.

[Banksie]

If you and your friend are being chased by a rabid moose, don't worry about out-running the moose, just worry about out-running your friend ;)

Have you see this moosie http://www.youtube.com/watch?v=IJNR2EpS0jw one of the dumb ways to die is dressing up like a moose in hunting season - lol.

[RazorX]

Markets certainly fall faster than they rise. It took 30 days to gain $4.50 and less than two to lose $2.50 +. No real support but the SP has previously consolidated at $10.50, $7.50, $5, and $2.50 - maybe one of these could be a target? Haven't checked the fib levels but it would be interesting to see if anything lines up.

[Toasty]

Its seems to be holding ok between 12:10 and 12:60. In a bouncy kind of way. Any thoughts on tomorrow?

[Snow Leopard]

...Any thoughts on tomorrow?

TGIF

Best Wishes
Paper Tiger

[Snow Leopard]

The Jim Cramer (ex US fund manager and now Mad Money host) once said "Three days of selling, then BUY".

If there is three days of near 10% drops, then look to technicals like RSI to suggest Xero is oversold.

I will be watching Diligent closely for the same reasons.

Given the recovery from the day's low today I would be extremely careful with this one, it doesn't smell right for the J. Cramer way to millions.

DIL is still on as a reasonable bet for next week.

But tomorrow is another day.

Best Wishes
Paper Tiger

[Toasty]

Given the recovery from the day's low today I would be extremely careful with this one, it doesn't smell right for the J. Cramer way to millions.

DIL is still on as a reasonable bet for next week.

But tomorrow is another day.

Best Wishes
Paper Tiger

How do you mean PT? Do you think it might be the calm before the big fall?

[Snow Leopard]

I did not phrase that last post at all well. :ohmy:

Rapid fall to $11.50 (definite support level eh?) in the first 1.5 hours and then the rest of the day on a steady climb to $12.50.
There are some people with money out there who really believe Xero is worth this sort of price. :(

A sensible thing now would be for it to hang around this area for a while.

But you never know when the market is going to get properly spooked.

Best Wishes
Paper Tiger

[neopoleII]

""which doubled revenue to $39 million in its last full year but is reinvesting for growth and is yet to turn a profit - at $1.5 billion.""

so if they get revenue of a 100 mil does that mean a stock value of 4 billion?
or revenue of 300 million like a good sized medium nzx company does that mean 12 billion?

seem to me something is wrong.
and if these states are correct...... what sort of divi payment would one expect from a 12 billion dollar company with 300 million turn over?

i guess my NZO shares are rather sad compared to this sharemarket darling

[Hoop]

The Jim Cramer (ex US fund manager and now Mad Money host) once said "Three days of selling, then BUY".

If there is three days of near 10% drops, then look to technicals like RSI to suggest Xero is oversold.

I will be watching Diligent closely for the same reasons.

Paper Tiger....
http://www.sharetrader.co.nz/images/icons/icon5.png Whats RSI got to do with it

Its a TA Oscillator.. PT

With steep trending volatile shares such as Mining shares and XRO... the share climbs steeply into the stratosphere where there is no historic Support or Resistance guidelines..Its pedal to the metal and racing at maximum redline revs so most TA indicators are useless as well. Like all engines revving at the redline something has to give eventually and it is usually sudden without warning....Usually survival instincts are heightened and the investors sense this can't last much longer and when it does and keeps going up so does investor anxiety...so it makes sense to look for TA indicators that measure investor trading anxieties.. Oscillators do this but I already know the anxiety exists because I can feel it, so what the point of Oscillators? ..What I want is a warning system to get out in time....sadly I can't help as I stay well clear of entering into a very steep trending type shares...I try to get in early or not at all....so sadly (again) I miss out on many of these stocks...

There are some people on Sharetrader who perfect the art of timing with Aussi miners they would be the people that should post here as they would have the most useful information....Trading in the likes of XRO at this stage requires expertise not greed.

Back to TA oscillators ... Many commentators view the Chaikin Oscillator as a good divergence warning system and it diverged with XRO but I find it cries wolf far too many times to be taken seriously during steep trends.
My favourite Oscillator is the DMI which showed the signal line went from steep rise to plateau a month ago indicating that the steep share climb had no current trend foundation. A month ago XRO was at $11.00 I've got no idea if this means anything or not but it just happens that there is a chart support at this level.

XRO bought back memories from years ago down at the pub..I had this chat with this hardcase chap who invested mostly in Aussi mining stock and I remembered him twisting this old saying around.......the noise of a sparrow fart at the crack of dawn is enough to send rabbits racing back to their burrows.

[zs_cecil]

The Jim Cramer (ex US fund manager and now Mad Money host) once said "Three days of selling, then BUY".

If there is three days of near 10% drops, then look to technicals like RSI to suggest Xero is oversold.

I will be watching Diligent closely for the same reasons.

I somehow heard about a similar theory in a different version before. It says if the share price went down 20% sharply in a short period, then the stock is oversold and good to buy. I forgot which context this theory is under. I don't have a reference for this theory. I guess it somewhat fits the current situation.

[Toasty]

Toasty the international trades are not "real" trades, they are just reprints of trades executed on the ASX yesterday.

Hi Silverlight. I don't really understand that. Are they in effect just infomation bulletins? They are in NZ$ and they update the last traded price on my screen. I am with DB. Is it unique to DB or standard practice? Thanks for your help. Still lots to learn.

[J R Ewing]

Looks like it is 2 days down only!

Unless it is the dreaded dead cat

[Toasty]

And away it goes again. Emotion or manipulation? .....or an "Alive Cat Jump"?

[RazorX]

Quite possibly $15 was a psychological level for many a trader so as moosie said - profit taking. I don't think we can call the last two days a correction can we? Makes for an interesting study.

If one had plenty of dosh to spare, and nerves of carbon fibre one could make a nice profit.

[Blendy]

Yeah I didn't have carbon fibre nerves as it turned out, so the money i was going to risk yesterday is still in my account...

[winner69]

Third day of declines. Major traders fresh off the weekend with quadruple grande lattes will push the stock up again starting Monday. Target price right now looks like $12. Good luck to anyone buying in!

good call mate

[Toasty]

The stock is Jesus!

Half my cup of tea came out my nose and is now congealing in the keyboard somewhere!

[Toasty]

$15 is going to be retested. The bubble will grow, we haven't seen the end of this until real bad news hits or the market takes a serious decline.

...ooor, just putting this out there...they meet/exceed their targets for this year and the greater market doesn't decline leaving room for optimism...ie the world situation actually improves...

[winner69]

Except that the third day of declines never eventuated. SP rose on the 3rd day!

will you let me off with 2 1/2 days of decline then ... before Jesus rose

[BIRMANBOY]

http://www.timothysykes.com/wp-content/uploads/2012/02/rollercoaster.gif

[kizame]

Meeting expectations is irrelevant. Exceeding expectations is also irrelevant. Have a look at what has happened to LinkedIn after exceeding analyst expectations for 5 consecutive quarters. The stock was trading on an impossible P/E of 1000, and as soon as the company moves to temper growth forecasts, the share price is slammed. It may well be like Amazon and Ebay now - where for the next 10 years the share price will go nowhere as the fundamentals catch up to the valuation. All it takes is for one report showing that growth is not happening as fast as everyone has decided it should be, and the share price ride is over. This is what will happen to XRO at some stage - but you can't predict when. Just be very careful around earnings report time.

Arggh earnings report time,they don't really report earnings do they,there lies the real concern.

[bjd]

I bought in at 0.90c and put a trailing stop loss in about a month ago, when it dropped to $14.85 it got triggered but the spreads were such that it sold at $14.30. Not going to get into it again as I guess that was once in a lifetime.

[bigev]

How did you do the trailing stop loss and what parameters did you need to provide and why?

[bjd]

How did you do the trailing stop loss and what parameters did you need to provide and why?


I just manually adjusted a stop loss each day to trail the current price. I needed to supply a trigger price and a limit price, the trigger is what I adjusted, the limit was the point below which the sale would be stopped. Alternatively I could just put market price as the limit. I used $11 as the limit.


I was going to ask this forum about whether this was the right approach but my account with this forum was only just validated so it sold before I could ask. I do find liquidity on the NZX a problem and have moved my gains over to ASX where hopefully sales are made as soon as the stop loss is triggered. In any case I am happy with how it turned out.

[Snow Leopard]

I bought in at 0.90c and put a trailing stop loss in about a month ago, when it dropped to $14.85 it got triggered but the spreads were such that it sold at $14.30. Not going to get into it again as I guess that was once in a lifetime.


I just manually adjusted a stop loss each day to trail the current price. I needed to supply a trigger price and a limit price, the trigger is what I adjusted, the limit was the point below which the sale would be stopped. Alternatively I could just put market price as the limit. I used $11 as the limit.


I was going to ask this forum about whether this was the right approach but my account with this forum was only just validated so it sold before I could ask. I do find liquidity on the NZX a problem and have moved my gains over to ASX where hopefully sales are made as soon as the stop loss is triggered. In any case I am happy with how it turned out.

Given that the close the close the previous day was $14.90 a stop at $14.85 is really tight, it leaves no room for the normal noise in a days trade. A few % percent (not cents) below is fairly tight.

Also when you get the sort of run that happened that day with a sudden lack of buyers then the price you can actually get can be significantly lower than your stop. You will find the same thing happening on the ASX for a similar type of stock.

Not a fan of automated stops myself and never use them. I like make to make my decisions on slightly more than the instantaneous price.

On the bright side you can claim to have got out near the top (for now).

Best Wishes
Paper Tiger

[Toasty]

The Bots appear to be back again. Nipping off chunks of 39 and 40 shares. I wonder why they don't just take out the blocks that are available. They are buying at $13.73 for instance and there is over 2000 available. Surely they would just grab it all. Not sure how this works....

[maddog]

Very interesting news today - MYOB is buying BankLink:

http://myob.com.au/myob/news-1258090872838?articleId=1257830925621

[CJ]

I agree with him in part. When ever someone buys a competitor, you expect some of those customers to be lost, so Xero is the natural beneficiary.

That is if you were using Banklink as you hated MYOB, being forced to use MYOB may cause you to change. That is why ANZ held onto the National Bank brand for so long and lost customers as a result of the merger.

[Toasty]

I work at an accountancy firm and the accountants here rate Xero as head and shoulders above banklink. In fact just about all banklink clients were transferred to Xero prior to me starting here. Banklink seems to have a foothold in the rural sector as Xero does not seem to handle farming that well. Banklink also has a per transaction cost so if you are a high volume business it can get quite expensive to use whereas with Xero you are capped at the monthly price plan you opt for. The xero plans are based on transaction volume mainly.

[Toasty]

Another shot across the bows from Drury. Man he takes no time at all to get on to this sort of thing. Kind of puts Goebbels to shame really!


I would rather have someone actively driving the opportunities than sitting back and waiting for the market to make up its mind. Sometimes you just have to tell the market what it wants.

[maddog]

Moosie's comment highlights that Drury is simultaneously Xero's greatest strength and its greatest weakness.

His drive and energy are amazing. His ability to raise funding and build a strong team are to be admired.

But the man is a very loose cannon who fires completely baseless barbs off at his competitors and is quite happen to bend the truth to suit his own purposes. Sadly, I think he has lost much of his hard-earned credibility with the arrogant way he now behaves.

[maddog]

Sparky - I already get the impression that the key commentators have very little time for Drury. I sense that Chris Keall, Tom Pullar-Strecker and Ben Kepes for example would be only too happy to bring Drury down to size. I don't think they are anti-Xero - just sick of Drury's spin doctoring and attacks on his competitors.

[maddog]

And more from Drury on the deal: http://blog.xero.com/2013/05/industry-consolidation/

[Schrodinger]

Drury is a master PR man. Watch his genius in action. If you understand how global companies work this centres around the 'Brand' and Drury knows this well.

We need more like him.

[Toasty]

Drury is a master PR man. Watch his genius in action. If you understand how global companies work this centres around the 'Brand' and Drury knows this well.

We need more like him.

I agree. Rod spent a lot of time in the US with Quest during the Aftermail acquisition. I think that NZers aren't really up with the way that the game is played on the wider global stage where presence plays a big part. We are uncomfortable with people putting themselves and their company/product out there like this and it attracts unfavourable comments. If you look at the way companies promote themselves in the US for instance it is a lot more "in your face". I sense that Rod is addressing a wider audience than just the limited NZ market.

[maddog]

Sorry Schrodinger, Drury is no master at PR. Certainly he has his fans. But he also has a lot of detractors.

It is entirely possible to succeed in business and be widely liked and respected at the same time. Drury fails in that regard.

We need more people with Drury's good points - his vision, energy and passion - but we don't need the bad that comes with him - the petty attacks and the deception.

[Schrodinger]

Good points Maddog.

However, this is not how the game is played on the global stage. Xero is a global company and needs to play by their rules. If they were a pure NZ play him being 'liked' is a very good thing. However lots of people will really like him if he creates a hugely profitable company and makes NZ prosper.

[bunter]

Why did Drury make an announcement about how unconcerned Xero is about 'industry consolidation'?
To discourage shareholders from selling?

There's no surer way of sounding worried than making such an announcement.
And if he's worried, maybe it's a good time to sell.

[CMo]

Rod made a few good points at his afternoon speech at EPIC yesterday. Firstly, Xero used to pay for ads in the Herald... about $10,000 for a page. Pretty expensive advertising to 'get exposure'. Rod has since become known for having an opinion on most topics. so when journos have a story (any story!!) where they need a quote, they call him up. He then gets his and xero's name in prime sections of the newspaper for free. Not rocket science, but smart.

Remember, this myob and banklink deal is not 'new' in the making... It's been talked about for a while. http://blog.xero.com/2011/08/changing-of-the-guard-2/

The question is is it now too late to fight back in the small business sector?

[CJ]

Why did Drury make an announcement about how unconcerned Xero is about 'industry consolidation'?
To discourage shareholders from selling?

There's no surer way of sounding worried than making such an announcement.
And if he's worried, maybe it's a good time to sell.Adding to CMo point, Rod loves to make comments about everything. However, if he makes comments in media/social media re Xero, arguably he should also inform the markets.

[blah]

Why did Drury make an announcement about how unconcerned Xero is about 'industry consolidation'?
To discourage shareholders from selling?

There's no surer way of sounding worried than making such an announcement.
And if he's worried, maybe it's a good time to sell.

Yes I was surprised that Xero made the announcement that it did today. Surely it must be unusual for a company to play down a competitor's acquisition in a stock-market announcement. That announcement is the sort of thing that you would expect Drury to comment on in newspaper reports - not in a market announcement. One then would question the motive of this announcement and the purpose it serves.

To me, it sounds like Xero is uncomfortable with MYOB's acquisition. It also felt the need to bring in some external comment - as if their word was not enough - from Paul Pettit and Ben Shaw.

disc - watching Xero for a long time, but don't own any.

[Toasty]

Why did Drury make an announcement about how unconcerned Xero is about 'industry consolidation'?
To discourage shareholders from selling?

There's no surer way of sounding worried than making such an announcement.
And if he's worried, maybe it's a good time to sell.

Also if he didn't make a comment then there would be the inevitable conclusions that they were actually worried and pretending that it wasn't important.

[Banksie]

Also if he didn't make a comment then there would be the inevitable conclusions that they were actually worried and pretending that it wasn't important.

Damned if you do and damned if you don't. Are we reading too much into this. I think he just saw it as an opportunity to get Xero's name in the press again.

[Edit] - and the share market release is to keep all the feed junkies happy. There are many out there that monitor feeds, news, market announcements, inbox, facebook, twitter, etc for messages, each morsel of information gives another dopamine hit to the brain's reward system.

[Edit][Edit] - I should have added forums to that list ;).

[CJ]

Damned if you do and damned if you don't. Are we reading too much into this. I think he just saw it as an opportunity to get Xero's name in the press again.Agree. PR dressed up as a market announcement.

[Everwood]

Xero wins top prize at Hi-Tech Awards
http://www.3news.co.nz/Xero-wins-top-prize-at-Hi-Tech-Awards/tabid/412/articleID/298281/Default.aspx

[luigi]

https://www.nzx.com/files/attachments/175673.pdf

Solid numbers in the annual report today. Year-on-year Australia and US/rest of world customer numbers tripling, UK doubling and solid growth continuing in the NZ market too.

[Schrodinger]

Yep looks on track.

Australia looks exciting in terms of scaleability. US/UK is where the big game will take place and decide Xeros outcome.

[blah]

and we can expect Xero to reach new highs, not next week but in two weeks time when the market digests the annual report?

[Toasty]

and we can expect Xero to reach new highs, not next week but in two weeks time when the market digests the annual report?

Might actually get a bit of a boost this morning. The first match price appears to be $13.98. Might claw back over $14. Not sure why this would spark any enthusiasm though. These results have been pretty well pubicised in advance of the official release.

[blah]

Anyone else suspecting it may actually be different this time and that XRO has reached the bottom of its loss levels and can only go up from here???

DISC - Wondering if I have gone bonkers... Not holding XRO; holding SNK and DIL

I think Xero's losses will continue in the near future as they continue to pursue growth. It will be more reassuring to investors and to-be investors when their losses don't double everytime their revenue does. I don't own Xero, but have been watching it for ages. I've been a bit envious of how well it has performed, but at the same time I don't think I want to touch it given Xero is highly speculative, and nobody knows how Xero can counter its competitive threats that are looming in the background at the moment. I'm just wary that Xero could very easily be the next Rakon.

Unless Xero starts to make profits, or when it achieves a dominant market position in key markets without making profits, I think I will continue to watch with envy.

Disc - don't hold Xero. Hold DIL, PEB, SNK, SUM, and slowly acquiring SEA

[Toasty]

There is another article in the NBR suggesting that Forsyth Barr has bumped (up?) Xero's price and something about Woodward taking the axe to Diligent. Its behind the great paywall. Don't suppose anyone has eyes on it? I would get a subscription but I didn't get where I am today by paying money for things....

[Toasty]

Forsyth Barr XRO target price bumped from $12.50 to $14.30

Woodward has increased DIL's target price from $5.09 to $6.02 but re rated from reduce to sell.

Thanks Turmeric. Thats a big concession from a well known brokerage. Maybe they are just jumping on the band wagon. It would be interesting to read their research and see how they justified it. I love XRO but even I realise its a punt. Purely a world domination play...

[CJ]

Lunacy. The question is no longer, "How much money is enough?" but, "How much debt is enough to upgrade a SP further?".XRO has no debt. It has cash in the bank and has a track record of being able to raise more cash as needed to execute their plan. It is currently on track but given that track is hockey stick growth, shouldn't be an indication that they will stay on track. US numbers are the key as it is the only market with scale.

I assume you were refering to loses.

[Toasty]

Always worries me when an "industry expert" posts an optimistic target price. No sooner than Forsyth Barr suggest $14.30 and XRO is $13.40 and falling....sigh

[Arbroath]

I'd say a fair price is currently about $5. I don't doubt the potential and it may turn out alright but the current valuation is a joke. $1.5bln might be justified if everything goes well for the next 3-5 years but not now.

Good luck to holders because you are "pricing it for perfection" as they say Stateside.

[whatsup]

I'd say a fair price is currently about $5. I don't doubt the potential and it may turn out alright but the current valuation is a joke. $1.5bln might be justified if everything goes well for the next 3-5 years but not now.

Good luck to holders because you are "pricing it for perfection" as they say Stateside.

The next cap raising is the direction to XRO's future and a scary prospect is that with the loss's getting bigger each year does not mean that there will ever be a profit, My Q is how many subscribers will they need before they show a profit and of those what % are high value customers IMHO there are a very big % of customers that do not cover XRO's costs.?

[whatsup]

Yes, I agree. I can perfectly understand a valuation of around $8.50-$9.00 a share, based on price/sales of 25 or so, rather than the 39 it is at the moment. It is hard to get a feel for Xero because they don't disclose churn and a couple of other useful metrics like other SaaS companies do.

Price/Sales for established SaaS companies tend to be under 10, but of course, Xero is growing heartily and is young.

I do acknowledge that they have a strategy, a CEO who has a track record, a board who has endorsed the vision, and strategic investors who back that vision. So I'm not arguing its a bad company!

The "kickup" in share price is the reaction that if the "push" into the U S was successful it would lead to a possible takeover by a US based company.

[whatsup]

drury has specifically said his company is not for sale though, and i doubt he will ever entertain a thought of one when he has global domination at his feet...


yeh right !!

[CJ]

Another interesting article on SaaS businesses and different metrics. I haven't looked at how XRO compares:

http://pandodaily.com/2013/05/21/memo-to-this-years-yc-class-its-damn-hard-to-build-an-enterprise-company/

[lastmoa]

thanks for the article CJ. so when the scaling begins after the customers are hooked the bleeding should stop? but in the mean time losses will expand so growth cancontinue unabated. man, xro is risky as hell!

Xro, Dil, SNAKK, etc. They're all risky - that's what some of us like about them and the challenge, and potential upside they have. Otherwise you invest in Ryman, Sommerset, POT, etc.
If Xero wanted to play it to some investors they would purely concentrate on Australasia. But going big globally increases the risk, of course, and increases the reward. The recent doubling of revenue shows that they are delivering so I won't use the wording 'risky as hell. They are a ways down the road but a lot of highway ahead, so good they have cash to utilise.
'Risky as hell' could be more applied to Snakk, if all be said.
I am a holder of Xero and Snakk.

[CJ]

Are Moose's allowed to be Directors? I could fire off an email if you want.

[lastmoa]

OK Moosie so while they might be a big no-no for your investment ideology could you please explain to me/the forum how Xero might go about creating a global accounting software package without incurring losses to begin with? If you can come up with something reasonable I suggest you would be worth a lot of money down at Xero HQ.

Waiting ..... also be good to hear a similar explanation how moosie thinks Snakk may avoid same?
Agree with pthers - good clear presentation.

[CJ]

Is it rather simple to assume that if XRO does reach it's 1 million customer mark, the SP will be an 8-10 bagger from the current price of $13? Man that would be one expensive stock on the NZX by far and away!The no no in my mind isn't the losses.

The question is does the price already factor in success which I think it does at a target of 1m customers. However, if you change that target to 4m with a 50% success, the price may be right - I haven't looked at this becuase if you use 4m, why not use 10m with a 30% chance of success.

Alternatively, it everything goes wrong in the US, they could just focus on NZ and Australia, be profitable and be worth (say) $500m.

[blah]

The no no in my mind isn't the losses.

The question is does the price already factor in success which I think it does at a target of 1m customers. However, if you change that target to 4m with a 50% success, the price may be right - I haven't looked at this becuase if you use 4m, why not use 10m with a 30% chance of success.

Alternatively, it everything goes wrong in the US, they could just focus on NZ and Australia, be profitable and be worth (say) $500m.

I agree. The biggest question mark is over how other investors have valued Xero so far: what sort of expectations they have priced in and whether or not these are reasonable.

In general I am not too bothered with Xero making losses. I am guessing that most of the costs are involved in enticing new customers to sign up. If this is the case, then profits can be made simply by freezing new signups and milking the existing customer base on the assumption that they stay with Xero. In any case, current losses are not all that relevant when future profits are more important.

I think the quote by Intuit's CEO is pretty encouraging though:
"I admire them. I think Rod Drury and the team have built a really good company, they have built a very easy and compelling product. We've learned some things from Xero that are helping us think differently, which is the highest compliment you can pay to someone who competes in your space"

[blah]

As they always say, buy low, sell high! I think anyone buying now for XRO has missed the greatest part of the party.

I think for the case of Xero, it should be more like buy high and (hopefully) sell higher. At any point in time, Xero did seem very expensive; and yet it has soared even higher!!

[lastmoa]

I think for the case of Xero, it should be more like buy high and (hopefully) sell higher. At any point in time, Xero did seem very expensive; and yet it has soared even higher!!

because they keep delivering on their story and the 1mill goal does appear to be more and more feasible.

[Schrodinger]

lol, I don't offer solutions, I am merely looking at it from an investor perspective, which means returns and a profit are the biggest driver. If you put any other company into the equation with continually mounting losses over 5 years, where would they be right now?

If XRO goes under I will be the first to put up my hand to curate the museum where their HQ is now (I love Wellington and that building is kind of cool). That's the only way I'm getting into XRO HQ!

Go check the Amazon numbers from their first years. They incured huge losses.

I havent looked lately at the Google P&L but I doubt it was that great at the start. In order to build a platform and globally dominate you need to do a land grab. For a SaaS business this means up front losses. The most important metrics are customer acquisition and retention. Thats the only numbers I am looking at with Xero at this stage.

[Toasty]

Just finished the presentation. Hard not to be enthusiastic after that. I am either easily influenced or they have a compelling story. I feel like I am in at the ground floor of a Google/Amazon/Worldcom success story.... Yay.

[CJ]

Here's the slide for people interested relating to Saas Growth 4545Interesting that they reference Matrix Partners as they published the Blog Sparky has previously linked too: http://www.matrixpartners.com/blog/saas_metrics_ndash_a_guide_to_measuring_and_improv ing_what_matters/

So while they publish that graph that looks pretty impressive, they don't publish any of the metric for us to determine whether they will ever get on the upside of the hockey stick growth - like churh and CAC

[Dentie]

Seems to me , every time the SP drops or competitor does something positive ...Rod comes up with something else to talk about to turn it all around, or criticise the competitor etc. I remember this kids story ... something about the pied piper ...

[zs_cecil]

Mate, Rod's been talking up XRO the whole time - right the way from $1 to $13! I don't see any evidence that he only talks it up to boost the SP when it is down a bit as you are suggesting.

And I personally think that the move of competitors has actually proved what Xero has been creating for the customers was what they have missed or ignored in the past. They want to catch up. The competition may give some stress to Xero. It definitely creates higher productivity to the accounting industry and more accurate and in-time data for customers.

[Dentie]

And I personally think that the move of competitors has actually proved what Xero has been creating for the customers was what they have missed or ignored in the past. They want to catch up. The competition may give some stress to Xero. It definitely creates higher productivity to the accounting industry and more accurate and in-time data for customers.

Productivity, efficiency, time saving etc etc for the Accounting industry and their customers have more direct access to their numbers than before, better understanding of their business, planning blah, blah. I don't see a lot of that efficiency being passed onto the customer $$$ fee wise though.

[lastmoa]

Productivity, efficiency, time saving etc etc for the Accounting industry and their customers have more direct access to their numbers than before, better understanding of their business, planning blah, blah. I don't see a lot of that efficiency being passed onto the customer $$$ fee wise though.

It gets past on with the increase of features as release versions go by. In addition to the Xero 'features to add' roadmap, Xero has a customer community where they can vote on what features they want to see in upcoming releases. The same goes for many SAAS products. I am sure some shortsighted (imho) people look at the non-reduction in fees, but efficiency saving is a saving money.
Customers also realise, in breaking from a stand-alone product to a cloud product that they save much money in hardware, backups and security. May take a few months before this dawns on them. 8-)

[CJ]

The implied efficiency gains come from within the businesses themselves.Not just that but also the fact that you have better quality (ie. upto date) information on hand, all the time. So while you maybe paying the same amount on an annual basis, the information you can access yourself instantly, and the advice your accountant can give you though out the year is much better.

In the past, SMB only got accurate information when their annual accounts were prepared, 6 months after balance date! Now they can run a P&L, Balance sheet or cashflow statement which is upto date, and for any period, when ever they want.

[Toasty]

Dellow, CJ and Turmeric understand the value that Xero provides. I may have mentioned before that I work for an accounting firm and this is exactly how we present it. It seems a bit evangelistic but it really does make a huge difference in the way customers run their businesses. No more hurried catch up at year end as the client scrabbles to do all the work they neglected throughout the year. Most owners I know reconcile all their accounts in the morning, plug in any notes about entries they don't understand and the accountants take care of this as the notifications come in. Tack on all the partner firms for reporting and inventory etc and its hard to beat.

It starts off as a quest by the customer for lower fees but generally we are adding in more services once the client sees the benefit. If anything our fees have gone up on average with hardly a protest. Had to change the way we interact with the clients though. Much more contact now.

[lastmoa]

Dellow, CJ and Turmeric understand the value that Xero provides. I may have mentioned before that I work for an accounting firm and this is exactly how we present it. It seems a bit evangelistic but it really does make a huge difference in the way customers run their businesses. No more hurried catch up at year end as the client scrabbles to do all the work they neglected throughout the year. Most owners I know reconcile all their accounts in the morning, plug in any notes about entries they don't understand and the accountants take care of this as the notifications come in. Tack on all the partner firms for reporting and inventory etc and its hard to beat.

It starts off as a quest by the customer for lower fees but generally we are adding in more services once the client sees the benefit. If anything our fees have gone up on average with hardly a protest. Had to change the way we interact with the clients though. Much more contact now.

Thanks Toasty.
Or i guess another way of looking at it is that if it saves a business owner 1hr of his month (month not day) then the subscription he pays has pretty much paid for itself.
Or if it saves his/her accountant time ... then time equals money.

[GRIFFIN]

We run our retail shops and our farming enterprises all through XRO and have done for 2 years its just brilliant no wonder its going well don't even require an accountant just a tax agent.

[CJ]

Churn is in the "mid to low teens per annum" as per the latest presentation. I assume exact numbers are available seomwhere else.WHle this is 'high' compared to DIL, given they are targeting SME's this isn't surprising and wouldn't necessarily reflect businesses moving to other providers. The split between businesses closing vs businesses changing provider would be interesting.

[CJ]

Yeah I would say a comparison to DIL is largely irrelevant. In saying that I don't know what a good churn in this sector would be...anyone?It depends in part on your CAC.

A churn of 15% suggests an average customer will stay signed up for 6 years. If you can pay off your CAC within this time, the cost of providing the service after the CAC is repaid is effectively nil.

[Toasty]

I remember Rod saying something like the churn rate was less than the death rate of businesses. I am not exactly sure what that means and I am pretty sure that the death rate of SME's is pretty high so maybe not the best thing to remember?

[CJ]

I remember Rod saying something like the churn rate was less than the death rate of businesses. I am not exactly sure what that means and I am pretty sure that the death rate of SME's is pretty high so maybe not the best thing to remember?THe death rate for new businesses is high but not all new customers would be new businesses. ie. existing businesses who migrate from MYOB would have got through the risking growing pains.

[lastmoa]

Interesting that 2 out of the 3 Director's just made SSH statements declaring quite substantial disposals a few days after they tell there shareholders they should be " not be putting on the brake, but going hard on the accelerator"...

:glare:

I would not call disposing of a few shares as a reflection on the future outlook. We all take risk off the table as various times/levels.

[CJ]

http://allthingsd.com/20130604/salesforce-com-makes-its-biggest-acquisition-yet-buys-exacttarget-for-2-5-billion/?mod=atdtweet

Paying $2.5b to increase revenue by $120m if I read it right

[Stranger_Danger]

That should be good for another buck to be added to XRO's undervalued share price.

[CJ]

Further Research from their stats:

Year Ended December 31, 2012 2011 2010 2009 2008
Revenue $ 292,272 $ 207,493 $ 134,267 $ 95,443 $ 72,342
Comprehensive income (loss) $ (21,029) $ (36,383) $ (12,107) $ (61,172) $ 3,559

So not that impressive to justify a US$2.5B price. Salesforce obviously think their technology is something that they are currently missing.

Expect a tweet from Rod today referencing this and pointing out that Xero is on the right track.

[Toasty]

I am now waiting for Intuits $30US offer by close of business today. I may take the rest of the week off if that comes through....

[Stranger_Danger]

Moosie - not quite, this kind of insanity is what guaranteed the dotcom bubble would burst in a spectacular way.

However, there was a decent lag time, as there may well be here.

6 more months to a year of this wouldn't surprise me, but like the dotcom boom (which I made major money from, by investing in unloved, ignored stocks at a P/E of 5 whilst everyone was distracted) I think I will be skipping the ride.

[lastmoa]

With SLI approaching $2.25 from a mere 3 days of trading, tech is most definitely in right now. I guess the question is, how long can it all last?

Some tech stocks will last and some won't. The one's that last will have a proven business model for revenues and be/stay innovative leaders in their areas. Don't put all tech's in the same basket. Some of the SAAS company's out there are going to surprise many of the 'dot com/chicken little' guys out there in the near future with their SP's.
Some tech stocks are bottomless pits for investor's cash - got to DYOR and decide which are which. With research I mean not just fundamental/technical analysis, but properly understand IT and where it is headed.

[Banksie]

Saw this side bar the other day and thought it might be useful when evaluating tech stocks. As I see it DIL pass the Fund Manager test - but I am not so sure about XRO.


What Fund Managers Don't Want to See


Investors who take a bottoms-up approach often talk about the importance of meeting with executives and seeing company headquarters and facilities for themselves. "We want to find good management, and you can't tell that from a glossy annual report," says Richard Cook, manager of the Cook & Bynum fund (ticker: COBYX). "You have to find ways to get a window into their world."
What are they looking for? In a nutshell: professional, but not ostentatious, companies run by down-to-earth executives who know their businesses and are respected by their employees. Now, here's what they don't want to see.

Fancy cars and vanity plates: "What kind of car the CEO drives is a great indicator of their approach to life and management," says Brian Frank, manager of the Frank Value fund (FRNKX). Ditto goes for over-the-top corporate headquarters -- complete with expensive art, lush gardens, and koi ponds -- as well as executives wearing bling-bling watches, rings, and cuff links.

Pictures with famous people: "It's a declaration of victory, which we don't like to see as investors," says Mitch Rubin, manager of the RiverPark Large Growth fund (RPXFX). He'd rather see family photos or pictures from company events than snapshots of the CEO with professional athletes and celebrities.

Ping-pong tables and other gimmicks: Having worked as a software engineer before moving into investing, Kim Forrest, an analyst with the Fort Pitt Capital Total Return fund (FPCGX), understands what drives engineers and other creators -- and it's not chair massagers or 24-hour frozen-yogurt bars. "That's just gilding the lily," she says.

Charitable causes that don't add up: Investors are all for corporate giving if it aligns with the company mission and enhances the brand, but box seats at the symphony for the C-suite or big gifts to the top dog's favorite cause "is giving away shareholder money," says Cook.

Long-distance leaders: "The management team is the body and soul of the company," says Rubin, who bristles when he hears about a CEO who doesn't live in the same city or state as the company headquarters. "If they set themselves apart, have different rules and different offices, it speaks of someone who is more about self-aggrandizement than the success of the business."

Clueless CEOs: Keith Trauner, co-manager of the GoodHaven fund (GOODX), recalls a company meeting where he asked the CEO to talk about his four largest customers. "He deferred to the CFO," says Trauner, who, needless to say, wasn't impressed.

Too much talk about the stock: John Buckingham, CIO of AFAM Capital, jokes that when companies come calling, it's time to sell the stock. "Frankly, we'd rather the managers ran the business than run around the country promoting the stock," he says. Regardless of where fund managers meet executives, "anything that sounds like they're selling their stock makes us suspicious," says Cook. "We much prefer management to be focused on their customer and let us figure out if their stock is cheap."

[Banksie]

but I am not so sure about XRO.

Just to clarify why I am on the fence regarding XRO - does Rod Drury's media presence count as talking up the stock?

[CJ]

XRO:

Has a fleet of minis with personalised plates
Has a flash wellington office
Pretty sure it has ping pong tables though doesn't have a slide to get between floors like Trademe has
Rod lives in the Hawkes bay and we all know how expensive regional airfares are in NZ
Rod does a lot of talk - A lot.

[lastmoa]

Just to clarify why I am on the fence regarding XRO - does Rod Drury's media presence count as talking up the stock?

I haven't seen Rod 'talking up the stock' - I like his enthusiasm and energy and he does make attempts to get people (not just investors) to understand what this NZ company does have the potential to do. There is an acute lack of understanding about IT/cloud/SAAS models here in NZ/Aust, imho. Anyway, with this media exposure comes hairy questions and so far he has come through ... and the story has not changed (for me anyway). Not saying Xero is already 'there' - just that it has a very exciting opportunity at something special. Albeit, Xero and other IT stocks still come with too much risk for many investors.

[CJ]

I haven't seen Rod 'talking up the stock' He may not 'talk up the stock' as that would cause disclosure issues no doubt, but he does criticise the opposition at every turn.

To date Rod has executed the plan as set out (once they changed the plan from going for break-even to a growth model) so he should be commended for that.

[lastmoa]

He may not 'talk up the stock' as that would cause disclosure issues no doubt, but he does criticise the opposition at every turn.

To date Rod has executed the plan as set out (once they changed the plan from going for break-even to a growth model) so he should be commended for that.

Yes, fair point, CJ. Sometimes I think he does criticise the MYOB's, Intuit, etc more than I would expect. He should let the defection of Winkler, from being MYOB's Chief Innovator + founder, speak for itself. Guess he gets a bit too enthusiastic. lol.

[Banksie]

Has a fleet of minis with personalised plates
Has a flash wellington office
Pretty sure it has ping pong tables though doesn't have a slide to get between floors like Trademe has

If the fleet of minis are to promote the company then I think this is good, however, if the CEO has a 'BigRod' plate - that is not such a good sign.

Flash offices and ping pong tables go hand in hand. It is about attracting quality staff. I do not agree with the article in that regard. Baby-boomers, Gen Xers, and Gen Yers all have different motivators and the start-ups are competing with likes of Google to attract this talent.

[Everwood]

There was article in the nbr today, could someone please outline what it said? The title is "Woodward bumps Xero target price" It could be the reason why Xero went up 50 cents today.

[Xerof]

They reiterate buy reco, with $16 target in 12 months

They expect XRO to triple customers this year

NBR also remind readers that it was Woodwards who brought MAD to the market as an IPO:t_up:

[Everwood]

They reiterate buy reco, with $16 target in 12 months

They expect XRO to triple customers this year

NBR also remind readers that it was Woodwards who brought MAD to the market as an IPO:t_up:

I appreciate the info Xerof!!!

[Stranger_Danger]

A P/E of 100 isn't too bad. Things were worse in 1999.

Oh......wait.

[blackcap]

A P/E of 100 isn't too bad. Things were worse in 1999.

Oh......wait.

Thats a PE of -100 there.... way to go before they even get to a PE of 100 :) :P

[blackcap]

Total Issue: 117,219,111
Market Capitalisation: $1,723,120,932 (@1470)
Earnings/Share: -13.13 cents
Price/Earnings Ratio: -111.96
NTA/Share: 72.48 cents
Dividend/Share: NZD 0 cents
Dividend Yield: 0%
1-Week Range (Low - High): 1382 - 1475
4-Week Range: 1280 - 1475
26-Week Range: 679 - 1500
52-Week Range: 429 - 1500

Doesnt that market capitalisation of $1.7 billion make some ppl think? This company needs future profits (not revenues) of $170,000,000 to be on a PE of 10!!!!! When is that going to happen???

[CJ]

Doesnt that market capitalisation of $1.7 billion make some ppl think? This company needs future profits (not revenues) of $170,000,000 to be on a PE of 10!!!!! When is that going to happen???back of the envelop:

DIL has flipped to profits and has a profit margin of 40% so assume XRO can do the same.

So $170 profit = $425m revenue

Currently on $50m per year and doubling annually so

50->100->200->400->800

So by 4 years, that should be more than justified with $800 revenue resulting in $320 profit so a market value of 3.2 B at a P/E of 10

Do you buy the growth story?

Disc: sold out at $7.75 and not buying back in at current prices.

[lastmoa]

I have never seen such a forward looking SP float so high for so long. as my father said, "as soon as there is one report even slightly below expectations, the dream is going to start crashing down"

Yes, I had a sharetrading friend of mine that thought similar to your dad when I was tapping him to get into Xero at $4.00. He opted instead to stay with his safer blue chips because the calculations didn't add up to the fundamentals he expects to see in a good stock. Stories don't matter for some people out there and thank god we all think and act differently. 8-)

[blackcap]

back of the envelop:

DIL has flipped to profits and has a profit margin of 40% so assume XRO can do the same.

So $170 profit = $425m revenue

Currently on $50m per year and doubling annually so

50->100->200->400->800

So by 4 years, that should be more than justified with $800 revenue resulting in $320 profit so a market value of 3.2 B at a P/E of 10

Do you buy the growth story?

Disc: sold out at $7.75 and not buying back in at current prices.

And in 4 years following revenues rise to: 1600, 3200, 6400, 12800

No I do not buy the growth, nor do I buy the profit. No way with 800m revenue that they will be making 340m profit.
Also 100% growth is possible for a year, maybe 2 but after that no way.
Still not convinced. Look I know its a great company, great product and will go a long way. Just cannot see them capitalised at $1.7b right now. Too many uncertainties and what happens when a competitor with a superior product comes along?

[CJ]

XRO getting ready to test $15 again.

Anyone else here starting to think we are in a SaaS bubble right now?The high prices are driven by high growth. Remember that these are paying customers unlike the previous tech boom which was driven by high growth in page views or unique users.

Provided revenue growth continues, SaaS companies can reduce costs (sales and marketing) quickly to turn cashflow positive in a short space of time.

Watch the growth numbers from paying customers, not just eyeballs.

[Toasty]

Yes, I had a sharetrading friend of mine that thought similar to your dad when I was tapping him to get into Xero at $4.00. He opted instead to stay with his safer blue chips because the calculations didn't add up to the fundamentals he expects to see in a good stock. Stories don't matter for some people out there and thank god we all think and act differently. 8-)

I know of quite a few people who were actively talked out of taking part in the IPO or were talked out of selling their holdings early on by Brokers or even their accountants due to it being perceived as risky. Fair enough I suppose but I wonder how those people feel now. I have trouble believing brokers recommendations after some of the cock ups I have read.

[lastmoa]

The high prices are driven by high growth. Remember that these are paying customers unlike the previous tech boom which was driven by high growth in page views or unique users.

Provided revenue growth continues, SaaS companies can reduce costs (sales and marketing) quickly to turn cashflow positive in a short space of time.

Watch the growth numbers from paying customers, not just eyeballs.


Well said, CJ. I will add that such companies do not necessarily need to reduce costs to quickly turn cashflow positive. Just keep them in a stable situation and let the increasing customer base widen the disparity between expenses and revenue.
Yes, many people still have a problem differentiating between the 90's tech boom and where we are at now.

[maddog]

If you haven't seen it before take a look at the Gartner Hype Cycle:

http://blogs-images.forbes.com/gartnergroup/files/2012/09/2012Emerging-Technologies-Graphic4.gif

They've positioned Cloud Computing as over the "Peak of inflated expectations" and part-way down toward the "Trough of disillusionment" which they think it will recover from and reach the "Plateau of productivity" in 2-5 years.

It's an interesting model. I suspect Xero is still on the "Peak of inflated expectations". Only time will tell if it has a "Trough of disillusionment" before making its way back up again.

[Banksie]

If you haven't seen it before take a look at the Gartner Hype Cycle:

http://blogs-images.forbes.com/gartnergroup/files/2012/09/2012Emerging-Technologies-Graphic4.gif

They've positioned Cloud Computing as over the "Peak of inflated expectations" and part-way down toward the "Trough of disillusionment" which they think it will recover from and reach the "Plateau of productivity" in 2-5 years.

It's an interesting model. I suspect Xero is still on the "Peak of inflated expectations". Only time will tell if it has a "Trough of disillusionment" before making its way back up again.

Interesting graphic - thanks Maddog - I hadn't seen it before.

Xero themselves are not a cloud computing supplier. Rather they use cloud computing to deliver their product (an accounting package). So if cloud computing is still on the way down then they are exposed to the same risks. What are the risks to cloud computing? I suspect security breaches and major outages will be some of the issues. We have already had a little taste of this in NZ with the recent Telecom/Yahoo!Xtra email issues.

[CJ]

Well said, CJ. I will add that such companies do not necessarily need to reduce costs to quickly turn cashflow positive. Just keep them in a stable situation and let the increasing customer base widen the disparity between expenses and revenue.My point there was if the US rollout doesn't work, they could scale back their US opertions quickly, and be cashflow positive from NZ and Australia. They wouldn't be worth $1.7B but they would be a viable company going forward.


I suspect security breaches and major outages will be some of the issues. We have already had a little taste of this in NZ with the recent Telecom/Yahoo!Xtra email issues.I believe them using Rackspace, a specialist provider, decreases the risk of this rather than them doing it inhouse.

[Banksie]

I believe them using Rackspace, a specialist provider, decreases the risk of this rather than them doing it inhouse.

That is good news - Rackspace are recognised as one of the industry leaders in the managed hosting and cloud infrastructure markets.

http://www.gartner.com/technology/reprints.do?id=1-1F180OJ&ct=130412&st=sg

[CJ]

One of the fundamental mistakes investors make is to confuse a great company for a great stock investment. The same goes for any company. Apple is a great company but its share price has dropped from $700 to in the $400.

Buffett tries to find great companies that are undervalued. So while XRO may (or maynot) be a great company, I personally feel it is currently overvalued. I will reassess when the next customer data comes out.

[maddog]

Turmeric

Can you please give me some examples of companies that have grown rapidly while at the same time losing a lot of money, then cut costs (presumably getting rid of a lot of staff) and achieved profitability.

I can't think of any significant examples but there may be some. I would have thought Xero's plan will be to stabilise costs while revenue keeps on growing and eventually outstrips the costs.

At the moment costs just keep on going up ahead of revenue and have done so for six years. Eventually, if Xero is to be successful in the long term, that has to change.

[CJ]

Can you please give me some examples of companies that have grown rapidly while at the same time losing a lot of money, then cut costs (presumably getting rid of a lot of staff) and achieved profitability.Facebook - didn't cut costs I dont think but it went from massively negative cashflow to massively positive cashflow as its growth in revenue exceeded its growth in costs.

[maddog]

Thanks CJ

There are many examples like Facebook. Amazon is I believe another.

However, I keep seeing people saying Xero will grow and then cut costs to achieve profitability. I just don't buy that strategy. The companies that cut staff are ones that are in trouble. Once you start cutting staff, customers are much more likely to lose faith in a company and good staff leave seeking more stable opportunities elsewhere.

My view is that if Xero is to be successful it has to change to a pattern where revenue growth outstrips cost growth. So far they have not shown they have the ability to do that or given any plan for how to do so. In the meantime investing in Xero is an act of faith.

[blackcap]

NOt that much of a parrallell but does anyone remember a company called Nokia from 4 years ago?

[CJ]

Maddog - it was probably me who said they could cut costs. But that is a worst case scenario with a (say) 5% probability. They have a good track record of tapping new equity when they need more cash to fund growth.

[Arbroath]

No, I have the same problem with XRO as I do with LINK (LinkedIn) - think they are awesome companies, but the share price is going to make them a crap investment. For those who got in at the beginning they had a great ride, but to get in at this point would be stupidity as history always repeats for these types of companies. Even the most successful companies on the planet couldnt escape being brought back to earth.

My sentiments exactly - from an investment perspective these types of companies are highly questionable.

[maddog]

Hi Turmeric

Just going back to your 4.22pm comment yesterday that: "for the last financial year revenue grew faster than costs":

In percentage terms you are correct - I just did a quick calculation and Xero's revenue grew by 101.5% whereas costs grew by 96.1%.

In absolute terms it was the other way around. Revenue grew by $19.66m whereas costs grew by a considerably higher $26.202m. That was what was behind my earlier comment that at the moment "costs just keep on going up ahead of revenue". For Xero to ultimately prove to be a successful company that gap has to close.

And CJ - I agree that Xero has a great record at raising equity. In the short term Xero is in no danger of running out of cash despite its negative cash-flow. However, equity eventually wants a return. If it doesn't the equity of savvy investors finds another home. Xero is flavour of the month at the moment. That won't always be the case unless it really is different this time.

[CJ]

And CJ - I agree that Xero has a great record at raising equity. In the short term Xero is in no danger of running out of cash despite its negative cash-flow. However, equity eventually wants a return. If it doesn't the equity of savvy investors finds another home. Xero is flavour of the month at the moment. That won't always be the case unless it really is different this time.Interesting to note that the recent capital raising was out of the US, from funds that specialise in technology shares, and who are obviously happy with the metrics.

[lastmoa]

Interesting to note that the recent capital raising was out of the US, from funds that specialise in technology shares, and who are obviously happy with the metrics.

... and who understand the 'game changing' software model that comes with this global move to mobility. Microsoft took a while to understand this and dropped the ball, imho.

[CJ]

Quick question - XRO indicated to me that they internally calculate various SaaS metrics but do not publicly disclose them. Would the likes of Thiel and the other US investors from the capital raising have had access to these data? Or do they only get access to publically available stuff like the rest of us?My guess is they would know. It was the company issuing the shares so a bit different had it been an existing shareholder selling their holding (note - a bit of this happened too but predominantly new shares).

[Toasty]

$15 breached. $150 up next! :p

Writing letter of resignation now to save time.

[Toasty]

On the subject of Rod speaking out

http://www.nbr.co.nz/opinion/rod-drury-russel-norman-go-it-twitter-over-palantir#comments

Funny stuff

[maddog]

Hi Turmeric

Yes we did use slightly different numbers - we obviously didn't include exactly the figures for the minor stuff like interest and tax.

It is possible to interpret Xero's numbers in many different ways. You focused on percentages to conclude the gap between revenue and expenses was closing. I focused on the actual $ gap to conclude the gap was increasing.

Using your numbers (from post 1801) the gap between costs and revenue in the year to 31 March 2012 was $9.4 million. In the year to 31 March 2012 the figure was $15 million. If I extrapolate that trend the gap is increasing - and based on Drury's comments about doubling employee numbers in the coming year I think the gap will probably increase again.

However, extrapolation is only moderately useful in this case. For Xero to be truly successful it, at some point, needs to have a step change - a break with past trends so that revenue keeps on increasing rapidly while costs plateau or only increase slowly. What I want to hear is how Xero is going to do that and when, and so far it has given no indication of what it intends to do.

My argument yesterday was with those who argue that Xero will become profitable by cutting costs at some point. I think that is incredibly difficult for it and most unlikely.

[CJ]

My argument yesterday was with those who argue that Xero will become profitable by cutting costs at some point. I think that is incredibly difficult for it and most unlikely.Cutting costs may be a bit to far but how about a cost freeze. No new hires. Costs stay constant.

Those same people should be able to maint the growth at the same constant rate - especially since they sell to Accountants who sell to their clients so there is a bit of a time lag there.

[Toasty]

.

EDIT: New SP high for XRO by the way, $15.15 and counting ;)

and now $15.20

[Toasty]

Is anyone doubled-up by backing both XRO and DIL? I'm keen to see who will eventually win this tech race and become NZ champion!

I'm kicking myself. I was watching DIL at $2.20. Feel a bit reluctant to get in now.

My personal opinion is that Xero has the bigger opportunity with its potential market size, but obviously DIL is already profitable so easier to label a success by normal metrics....

[lastmoa]

Yeah mate, although I was relatively late with DIL. Got XRO around $1.3 and DIL at $3.60. IMO IF XRO succeeds they will win out as they have a far greater capacity for growth. In saying that over time I have been reducing in XRO to rebalance my portfolio and purchasing more of DIL as I see the short and medium term risk/reqard with DIL as more favourable. (my overall holding in $ terms is 4 x greater with XRO still though)

Either way though I am a happy lad. Two great companies in my opinion and been a great boost my small portfolio!

Interesting, Tumeric. You have mirrored with I have done with rebalancing my portfolio.

[Everwood]

Is anyone doubled-up by backing both XRO and DIL? I'm keen to see who will eventually win this tech race and become NZ champion!

I’m invested in both Xero & Diligent. My average price for Xero is about $1.03 and I was able to buy a lot of my shares between 70 to 83 cents. I bought majority of shares in Diligent for 1.09 after selling Charlie’s shares for 0.43 (Great timing) Then I bought more at $3.79 last year after selling my Fisher & Paykel shares. My average price in Diligent is about $1.86

[Everwood]

Nice going, have you sold any of you XRO shares along the way?

I haven’t sold any of my Xero Shares. I’m unlike to sell any of them for at least another 2 to 3 years. I’m not worried about the daily / monthly fluctuations because I believe this stock will be worth a lot more in the future. My opinion can always change, but as long as they keep executing their plan I will hold on to them.

[blackcap]

Apparently so - Man I love this company!! Looks like I can treat myself to a nice dinner tonight!

Well done termeric... just dont forget to take at least some profit if you have not done so already. At least get your initial capital outlay back :)

[Toasty]

I don't understand the upswing but I'm not complaining. Moosie promised $150 target so expecting that to come up this afternoon?

[CJ]

It is almost sickening to look at the one year graph and contemplate why I sold.

At least I picked one of the peaks that held firm for 3 month before getting blown away in the lastest onslaught.

Does anyone know when the next customer numbers it to be released - or any information at all that could justify the climb.

[lastmoa]

I bought in at $5 aaaaaages ago and sold out after 2 months of holding and waiting for a rise, then took the slight loss as I didn't understand the revenue/loss model and thought it was overvalued. Would be the happiest chappy if I still had that stock right now!

We all make mistakes .... and some of us learn from them .... to create a positive.

[Everwood]

It is almost sickening to look at the one year graph and contemplate why I sold.

At least I picked one of the peaks that held firm for 3 month before getting blown away in the lastest onslaught.

Does anyone know when the next customer numbers it to be released - or any information at all that could justify the climb.


The annual meeting will be held on 1st August. The next operating update will happen on 3rd of October when the updated customer numbers should be released.

[Toasty]

The annual meeting will be held on 1st August. The next operating update will happen on 3rd of October when the updated customer numbers should be released.

They usually announce the latest customer numbers at the annual meeting. Always a bit of a highlight. I will be there. Wouldn't miss it.

[CJ]

The next obvious mileston is 200,000 customers - will they have achieved that by the AGM? Might be a bit of a stretch. Rough calculations say they added about 47,000 in the 6 months (8,000 per month) from Sep 2012 until March 2013, means they will need a further 43,000 new customers in the 4 months from March till the AGM (11,000 per month). Anyone willing to bet they won't make it? not an offer just a question ;)1 April or just after would have to be a big sign up day for NZ based businesses so they should get a bit of a spike there.
The Deloitte partnership in Australia should show some quick gains one would have thought.
And the US efforts be starting to net results

So my guess is they will have 200,000 customers by then as it isn't really that much of an increase in customers compared to the last period (remember, their growth needs to be near exponential to justify the $16.10 it has hit today (currently $15.90))

[CJ]

Just to clarrify, when you refer to exponential growth, do you have a particular growth rate in mind?No but then I have been out and decided not to look at it again till the price dropped (that never happened).

When I bought in, I did a back of the envelope which I am sure had customer numbers doubling each year (I think I was actually looking at revenue but pretty interchangeable) and with costs leveling out in a years or two's time. That sort of model is fine in early days( 25->50->100->200->400->800) but once you hit say 1m customers, you dont expect to hit 2m the next year. My mind wasn't bright enough to figure out what the terminal growth rate should be at that point (a few years of 20% then down to 10%???)

Look at the small graph on the right of p6 (and yes I know the far right bar is a goal) or the revenue graph on p10 to see they are currently executing to plan https://www.nzx.com/files/attachments/175830.pdf
To be able to keep implementing to plan, they need to scale into the US so I'd be looking at those figures. Page 33 is also interesting as it shows the US isn't as important as I think.

If I was holding, I would be tracking the numbers for each region to see how far away that goal of 1m customers is and if the growth is still going strong or petering out to figure out what that terminal growth rate should be.

[lastmoa]

Cheers CJ, helpful info.

If you are interested, very back of the envelope in terms of timing, but IF you apply an anualised growth rate of 100% to the latest custmer numbers of 157,000 one would expect 197,800 customers four months later (roughly AGM time).

After playing with the customer numbers a bit I have decided to use March 2011 as my base year (36,000 customers) and apply a monthy growth rate of 5.95% (annualises at 100%). If you do that then the latest customer numbers (157,000 in March 2013) is in line with exponential growth (slightly above expectations actually). Would be looking at expecting 180,000 by AGM.

When I get a bit more time I will do what you did and look at revenue in the same light. A couple more years of data and I think the revenue cost picture will be a bit clearer as well.

Interesting. Thanks and good work, Tumeric. Yes, in their Big 1mill goal, overall the market share they are looking at getting in USA/RoW is conservative, as is most the other regions. Is an intriguing ride.

[zs_cecil]

All good mate. Another interesting tid bit is that based on my model the 1,000,000th customer will be announced in January 2016 ;)

EDIT: and a NASDAQ listing just over a year from now. Using $9.34m as a base in March 2011 with exponential growth at an annualised rate of 100%, revenue should reach $100m sometime in Sep 2014.

EDIT2: Just playing around with numbers so someone please correct me if I leading everyone up the garden path!

To simplify it, it is more of a question of which will come first before Nasdaq listing in your case? "Running out of money" or "Reach 1m customers" ?

[zs_cecil]

Stop raining on my XRO parade Cecil, you know it will be far less enjoyable for me to look at costs ;) I will do so, but just to point out first and foremost, in my case 1 million customers comes after NASDAQ not before!

:) No raining there turmeric. I must be the one watching the parade and waving the Xero flags or flowers.

[Toasty]

$16.21 this morning. A new record?

[blackcap]

In a way the fact that DIL, PEB, ATM, SNK, SLI have not performed that well and XRO has is a good sign. It would be strange if all these stocks rose sharply (would make me think it was a bubble). But what Tumeric is saying makes sense. The reason XRO stands out is that it probably does have the right mix of management, innovation, perserverance etc to be a good stock.

That said, still think that this is a ridiculously highly priced stock at present and would not touch with anything. Time will tell who was right and who was wrong. Prepared to eat my hat if need be.

[maddog]

There is a very positive article on Rod Drury in the latest issue of the Listener which came out over the weekend.

[randoman]

Back on the XRO train...

Offloaded half my holding on Friday and I must admit it's frustrating to see a pop like this. We all know XRO can be irrational long after you can remain solvent ;). Can't discount buying in again though.

Interesting to see how much it has decoupled from a very high correlation with DIL over the last 2 months as well.

[Everwood]

I sold a small amount of my shares in Xero today for $16.28 and used that money to buy more shares in Diligent for $6.97

[Toasty]

AGM is on 1 July. I believe that there is usually another boost after this particularly if they do announce another milestone or development. I would be hoping to see a customer number in excess of 200,000. They usually announce the numbers current to the day of the AGM.

I have been speaking to a lot of accountants and bookkeepers lately and the impression is that Xero is streets ahead in terms of usability than any of its competitors.

[lastmoa]

AGM is on 1 July.
.

1st August.