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

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Technology Shares

WiseTech share price higher on big news

This tech stock has found its new leader.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Technology Shares

$10,000 invested in DroneShield shares 5 years ago is now worth…

You might be laughing all the way to the bank if you had done this.

Read more »

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

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

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »