Xro - xero

[Blendy]

Logic would suggest (if that's at all a good thing to go on with this stock) that given Thiel et als buy in price of $6.00 that kinda buts a floor on the price (barring any further developments). I'm personally looking for re-entry if it goes below 6.80 and I think that is certainly on the cards. This SP fluctuation on the face of it seems a little similar to the middle of this year where from memory the price went from about $4.00 up to $5.80 then back down to $4.40 before returning to new highs...Using that pattern and $6.40 as the starting point $7.75 as the high then maybe it goes back to $6.60-$6.70??

My thinking exactly, in fact I had just set a 6.65 re-entry target, but I'll see what happens...

[Blendy]

I am hoping that it goes below $5.95 so I can buy back in with the portion that I foolishly sold at that level.

$5.95 would not have been a foolish sale price on the day! I bet you were totally happy with that!!

[Silverlight]

Investors who have made a profit here seem to be disappointed that they did not stay in? Surely when you sell, you sell because you have reached a pre-determined price target, or you believe the company is overvalued. Its hard to pick the top in bubbles but most bubbles will have a quick sell off, then a quick recovery before the decline, as investors who took early profits get scared they have missed out, and buy back in.

Attached is a quick chart comparing Xero to other bubbles based on returns and their peaks. I am not calling a top but if this is near the peak Xero could fall up to 50% over the next 2 years.

While I have called Xero overvalued for a while, I was in at $1.40 and $2.70 out at $4, Xero is tightly held, newly funded with a stronger balance sheet and is still growing revenues, however with no profits I would not want any more than 0.5% of my portfolio allocated to this stock.

Attachment 4241

Edit: additional chart added with Rakon data series reset for the their first peak at $5.45, rather than the second.

Attachment 4242

[blobbles]

You will probably be able to add gold to that chart in a year or so :-)

[Silverlight]

Hi Silverlight,

I respect your comments and know you are making some good points. In regards to your charts though, it seems to me that you could just as easily overlayed a couple of success stories (with similar beginnings to Xero) and hypothesise the opposite conclusion. I guess my point is with so much historical equity and commodity data around does it really mean that much to show a few that ended up crashing?

Tumeric if you can give me an example of an asset that was called a bubble but went on to hold its value, or add more value, I will see what I can do. Charts can be maniuplated to show whatever you want them to show, my chart just enhances my point of view.

On the same vein you could easily make a chart that shows Xero could go to $20, but that's not my fundamental view so why bother?

[Silverlight]

Two things that come to mind then:

1) It seems then you are working off the premise that Xero IS a bubble, when surely that has not determined yet, if at all. Or am I wrong?

I am working off my view that Xero is overvalued, thats where I have been from $4. $6, $8 or $20 is all overvalued, a bubble as you say has not been determined, and can only be viewed in hindsight, however given the iliquidity in Xero, any bit of bad news will send this stock down as quick as it has risen, from its overvalued state.

2) That you can manipulate charts is exaclty my point, if one were to hold the opposite opinion as yours, for example that Xero will go to $20, then no doubt they could find sotcks, indices or what ever that support their view, overlay them on top of Xero's historical SP and say this enhances their view. My point is that neither type of analysis is particulalrly insightful, infact they may well be spurious. Time will tell....

The chart was to spark discussion that this might be the top, and was used to enhance my underlying view. I didn't create the chart and then create my view, that would be spurious.

Working backwards a market cap of $800m on a stable tech business with 5% organic growth, think TradeMe, would trade on a P/E circa 20. This means profits of 40m, on 35% margins (high end), means revenues of least $115m. 3 times what they make now, with potentially 3 times as many customers (350k), a control of costs, and importantly not losses, but profits. Thats what the current market price says to me.

That the market thinks they will hit every milestosne to get 350,000 customers very soon and will be making profits. Thats a lot of bluesky priced in with no speed bumps expected.

[CJ]

My view is different though, I suspect in the long run it continues to go up, hence why I hold stock.

Well it is drifting back up. I think the low was $6.91 and now back up to 7.17 on very light volume.

[CJ]

So Xero released a new (Analyst Briefing) presentation today, which from what I can see didn't actually have anything new except a few quotes at the end re. the Thiel and Matrix Capital investment coming out of the U.S which I found quite cool.

https://www.nzx.com/files/attachments/168061.pdf

Slide 30 is the key for me. What they need to do to get to 1m customers.

Share price back up to 7.60.

Discl - got out at the top but wondering if it really was the top. My margin account is looking a lot more conservative now leading into the fiscal cliff.

[CJ]

A quick update on what the (new, single ledger) competition is upto:

http://techcrunch.com/2012/12/17/wit...unting-anymore

500,000 customers already. Not sure how many of these are 'active'. I think 2 or 3 are mine as I decided to trial it. It wasn't as slick and easy to use as Xero and I had issues with transactions between my two companies (duplicate transactions which I couldn't delete).
It is free so encourages the smaller end of the market but looks fully featured so they wont need to upgrade till they are beyond Xero product offering.

It is how Xero compares against the likes of Wave in the US that will be interesting over the next year. The incumbents will be strong for a while longer but who the main new entrant is is still to be decided.

And Ben Kepe's perspective who is much more knowledgeable in cloud issues than me (and I beleive has advised Xero in the past):
http://www.diversity.net.nz/wave-upd...io/2012/12/16/

[maddog]

Hi CJ

I mentioned Wave several months ago and it is interesting to see their continuing rapid growth. Their site is claiming 1,300 sign ups per day, which outstrips what Xero is achieving. And I'm guessing most of those are direct signups rather than via accountants. If so, Wave may well have mastered what has eluded Xero - as most of Xero's customers come via accountants.

To me, Wave's business model is truly disruptive and must be a real concern to the "incumbents" in the online accounting space such as Xero.