Conviction list: Goldman Sachs says Xero share price can rise 37%

This tech share could be a strong buy according to Goldman Sachs.

| More on:
A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Xero Limited (ASX: XRO) share price has been on fire this year. Since the start of the year, the cloud accounting platform provider's shares have risen an impressive 31%.

The good news for investors is that the team at Goldman Sachs believes it isn't too late to jump on the Xero bandwagon.

In fact, the broker believes the Xero share price is only warming up and sees plenty more upside ahead for investors.

What is Goldman Sachs saying about the Xero share price?

According to the note, Goldman has reiterated its conviction buy rating on the company's shares with an improved price target of $126.00.

Based on the current Xero share price of $92.00, this implies potential upside of approximately 37% for investors over the next 12 months.

What's new?

The broker has been looking at high-frequency data, Xero's pricing power, and its expectations for its FY 2023 results next month.

In respect to the former, Goldman highlights that high frequency data supports an improvement in the UK. It notes that app downloads imply +76,000 second half net adds, which is consistent with company guidance for a similar/better performance than the prior corresponding period. It is also ahead of consensus estimates.

Another positive is that its visitation and Google search shares continue to improve. And while North America is mixed, it sees the recent partnership with Allinial Global a positive. In addition, the ANZ region continues to track positively.

In addition, Goldman notes that Xero's cost reduction program is coming along nicely, with its workforce reducing meaningfully since the announcement. It points out that since March it has "seen Xero's Linkedin workforce decrease by c.14% to 5.1k."

Finally, its analysts highlight that "despite recent price increases, Xero is still inline with peers, with no historical impact on churn."

All in all, the broker believes Xero is a great option for investors and well-placed to grow into its NZ$76 billion addressable market.

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Man with rocket wings which have flames coming out of them.
Technology Shares

Guess which ASX All Ords share is rocketing 16% on an asset sale

This share is catching the eye with a very big gain on Friday. But why is it rising?

Read more »

a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall
Technology Shares

Why are Megaport shares sinking 14% on Friday?

Why are investors hitting the sell button? Let's find out.

Read more »

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Why today is a big day for this ASX 200 AI stock

This company stands to benefit from 'one of the most profound transformations in the history of technology'.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why are WiseTech Global shares crashing almost 20% today?

Recent controversy has led to delays to an important launch and hit its revenues.

Read more »

Woman with speaker
Technology Shares

After falling 62%, this leading ASX 200 share could be gearing up for growth!

This industry-leading company looks like a turnaround opportunity to me.

Read more »

A man has computer-generated images rushing through his head indicating an AI (Artificial Intelligence) concept of a communication network.
Technology Shares

ASX investors are obsessed with Nvidia shares! Here's why

The global chipmaker reported a 94% increase in annual revenue in the third quarter.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

Own WiseTech shares? Here's what to watch at Friday's AGM

This could be one of the major events of the year.

Read more »

Woman and man calculating a dividend yield.
Technology Shares

This ASX tech stock is down 93% from its highs. Could Trump tariffs give it a boost?

The ASX tech stock could enjoy tailwinds from Trump’s threatened tariffs.

Read more »