Xero shares could keep rising by 30%+ over the next 12 months: Goldman Sachs

This tech stock could be just warming up according to one broker.

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Xero Limited (ASX: XRO) shares were on form on Thursday.

The cloud accounting platform provider's shares rose 3.5% to $110.75.

Why did Xero shares thump the market?

There were a couple of reasons why Xero shares outperformed on Thursday.

The first was a strong showing for tech stocks following a stellar night on Wall Street's tech-focused NASDAQ index.

This has seen the S&P ASX All Technology index rise by approximately 2.7% today.

What else?

Also potentially giving Xero's shares a boost today was a broker note out of Goldman Sachs.

According to the note, the broker has reiterated its conviction buy rating with a slightly improved price target of $148.00. This implies a potential upside of approximately 34% over the next 12 months.

What did Goldman say?

The broker is feeling confident ahead of next week's half-year results release and is forecasting top-line growth of 21% to NZ$800 million.

Outside this, Goldman has listed a number of reasons why it believes Xero is a tech stock to buy right now. It said:

We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$76bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated (on CL).

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 Goldman Sachs Group and 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.

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