If the big insider boys are true believers...perhaps they should get in there with all their dosh and buy back the shares & turn them into treasury stock until the market turns to their favour
I'm actually hoping it goes quite a way down. It doesn't affect the business and Xero have implemented a lot of huge features lately with more coming. They don't have to be the leader in any market, just need to capture a decent share. A lot of the value I think will come in the business and bank connectivity strategies. I would be really keen to grab a few more and ride the story over the next 5 years, but I think the next 12 months will see a lot of the strategy becoming clearer.
Well glad I sold out at $40, but if only I had such good timing with all my shares!
One thing I'm learning is that the death cross is a pretty reliable sell signal, even if the fundamentals haven't changed. I should have acted on that with PEB. Sigh.
It's doubtful a large long investor would care about short term volatility unless the fundamentals have changed, either coincidentally or as a cause.
Perhaps they may top up when they perceive value, if they perceived circa $18 as value previously they may do so again provided nothing fundamentally has changed in the interim duration affecting their anticipation of estimated forward free cashflows.
Has anything changed in that duration ?
The Xero business model is all about capturing large future cashflows by spending up big now. Problem is cashflows for the next x-many years are negative, according to the business plan. Rod is not worried because he just draws a trend line on his graph to get an accurate fix on future customer numbers way out into the future.
The thing with using discounted cashflows to value a business is that cashflows in the next few years have a lot lower discount factor than cashflows in later years. It is only the projected cashflows in future years that give Xero value. If business growth slows those large positive values suddenly shrink in the present day valuation calculation.
Rod is convinced that he has enough cash in the bank to see Xero through to profitability. But he can't really know that. What if his future revenue growth curve is not as great as he thinks? He will have to come back to shareholders for more money. My question for Xero shareholders is this.
Peter Thiel thought buying shares in Xero at $18 was a great deal when he thought the US market would roll over under the Xero steamroller. So what price would a 'new' Thiel be prepared to pay for new Xero shares now under very different market conditions? I bet the answer would be nowhere near $18.
SNOOPY
Last edited by Snoopy; 15-08-2014 at 04:05 PM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
I agree Snoopy but that won't stop all the believers from getting their snout right into it when it almost inevitably hits $18 again sniffing about like hungry beagles thinking they're getting a cheap feed at the same price as Thiel and others.
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Originally Posted by MAC
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