Xro - xero

[Valuegrowth]

Will Xero go below NZ$ 20? Psychologically NZ$20 is very important.

[couta1]

Will Xero go below NZ$ 20? Psychologically NZ$20 is very important.

To those of us holding with a purchase price around the $40 mark there are a lot of other numbers psychologically important about 20 of them in fact.

[MAC]

Will Xero go below NZ$ 20? Psychologically NZ$20 is very important.

It may well go to where the ‘market’ presently values the forward timing and rate of sales expansion MarketWinner, and perhaps with an overshoot, because traders do like to follow sentiment curves for their own peculiar reasons.

Applying the Clare Capital work of late last year as a valuation reference:

http://img.scoop.co.nz/media/pdfs/13...s_20131003.pdf

Which scenario (1,2,3,or 4) do you think best fits recent numerical outcomes and the forward guidance provided by XRO at the AGM ?

[winner69]

I've always been of the opinion that Xero is on growth track 3 currently, with a hopeful shift to track 4 if US is successful. Over 100% growth per annum in customer numbers is going to be tough over the coming years.

Definitely on the Scenario 4 path

Even with the new shares (done after the Clare report) that an enterprise value of over $200 a share in 2017 (using their EV to sales correlation chart)

[winner69]

Seriously though moosie if you look at the FY15 estimates Scenario 2 is where we at.

Clare says 396,000 customers ....that's where it heading 284.000 last year and 334,000 the other day

Clare DCF then $8.11 (a year ago) but with less shares so let's say $8 today

Prefer his EV to sales chart

[Harvey Specter]

Hpw do you figure that Winner? Last stated CAGR was 87%, ever so slightly below the 89% quoted on track 3. 109% CAGR is track 4. I figure Xero can maintain a level inbetween those two at current clip.

Looks like track 3 to me though with potential to leap upto track 4 if they get the US humming. THere is no reason why they cant get huge growth there in the short term - hell they have enough staff there already!

[bull....]

Article in the AFR today about Xero, 1 buy most analysts neutral and a US based one has a sell ( currently my thinking as i personally think its still overvalued) - interesting was most US based analysts who cover intuit and sage have not heard of it and anyway and did not expect it to be a threat to the leaders at this point in time

[whatsup]

Sub, $23 now $22.69 ! XRO used to be a great trading share for some, not now falling knife for a while IMHO .

[couta1]

Heavy selling below the 26 week low of $23.00. Next stop is $20, and if that breaks then the tarrget is Thiel and cos buy in price of $18.15.

And 5 years from now no one on here would have a clue,it would all be guesswork aye.

[Beagle]

Revenue multiples are great for determining the level of implied growth that the market sees in a particular stock. Xero is way off the chart and if I was looking at a US company with multiples similar to Xero, I'd be expecting 200% to 300% growth.

But we have a very stupid naive market that has allowed the listing of Serko, Wynyard, ikeGPS, SLI on revenue multiples that they should be no way near.I blame it on NZers just not understanding tech stocks. I think the analysts in the instos are using either long run static WACC's or even worse declining discount rates to justify the valuations.

Both these methodologies are inappropriate for growth companies and misprice the risk.

From my rant on a paid NBR article: " You simply can't apply a long term WACC to a growth company. It will understate the early negative or low cashflows and overstate the likelihood of success of the long term cashflows [and applies no factor for the risk of 'failure' as VCM discount rates do] A declining discount rate is even worse as it will severely understate early negative/low cashflows and overstate long term positive cashflows.

You need to make an assessment of the risk RIGH NOW and apply that discount rate consistently [which should include a factor for 'failure']. At maturity (ie much later when the risk has subsided) you can adjust the discount rate as it is a different set of investors investing, but as an early stage investor all your future cashflows should be discounted at a high rate.

Or just use revenue multiples to compare it to similar companies in America/Europe as a sense check.

By any measure, tech companies in NZ severely overvalued by an insto base used to valuing old school mature companies in the construction/energy/telecoms sectors".

The tidal wave of new tech listings recently is something I view as a clear warning sign the tech sector is overheated. Same thing happened, (mad rush of new listings), right before the Nasdaq collapse 13 or so years ago.
I expect a lot more disappointment in this sector in the foreseeable future.