The Xero Limited (ASX: XRO) share price has started the month strongly.
In afternoon trade, the cloud accounting platform provider's shares are up 5% to $74.31.
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Why is the Xero share price charging higher?
As well as getting a lift from a strong showing in the tech sector on Thursday, the Xero share price has received a boost from a bullish broker note.
According to a note out of Citi, its analysts have retained their buy rating and $97.90 price target on the company's shares.
Based on the current Xero share price, this implies potential upside of almost 32% for investors over the next 12 months.
What did the broker say?
Citi notes that Xero's rival Intuit (the owner of QuickBooks) has released a quarterly update and highlights that "Intuit expects digitisation to be a bigger driver than macro for online accounting."
It also points out that Intuit's performance in Australia has been weak, which bodes well for Xero. It commented:
The interesting takeaway from Intuit's 1Q23 result was the divergence in regional performance, with Intuit calling out strength in North America and weakness in Australia whereas Xero pointed to macro weakness in North America and strength in ANZ in its recent result. This likely reflects the relative strength of the players. Intuit calling out macro weakness in UK does support Xero's view that UK was being impacted by macro in the Sep half. While this could raise concerns on Xero's guidance for subs growth to pick in up in 2H in UK, we see Making Tax Digital deadlines as a tailwind.
Overall, we see positive read-throughs for Xero given Intuit noted that digitisation rather than macro is a key driver of Quickbooks' performance, while pricing continues to be rational. With subs growth set to improve and margins set to benefit from slowing headcount growth, we reiterate our Buy call.
