More than $50 million of shares in Xero were traded on
Wednesday and Thursday, the days leading up to the market
darling's announcement to the NZX yesterday.
Brokers contacted said the ''average day'' for Xero trading
had been about $10 million. About $31 million of shares were
traded on Wednesday and about $21 million on Thursday.
The shares fell from a high of $44 during the middle of last
week to close on Thursday night at $37, a drop of nearly 16%.
Xero continued its stellar rise in all measures except profit
in the year ended March 31. The unaudited figures show Xero
more than doubled its loss to $35 million in the period,
compared to a loss of $14.4 million in the previous
Craigs Investment Partners broker Chris Timms said that meant
an ''absolute zero chance'' of any dividend for the
investors, including those who bought back into the shares
Mr Timms acknowledged there was a lot of movement in the
shares leading up to the announcement and a substantial
increase in volume.
There were four pieces of research out on Xero, with three
sells and one buy, with an average share target price of $30.
''This is a growth company and they have a fantastic front
person in Rod Drury for the business. And while is this
fantastic, in the end you have to convert the revenue into
profitability at some stage.''
Investors would look at the top-line growth and be hoping for
more growth in the coming year, Mr Timms said.
Operating revenue for Xero was up 83% for the year to $70.1
With monthly committed subscriptions growing to $7.8 million,
the recurring revenue model meant Xero started the 2015
financial year strongly with $93 million in annualised
subscriptions, up 81% on the pcp, Mr Drury said.
The strong New Zealand dollar hurt reported operating
revenue, given 66% of the revenue was denominated on foreign
currencies. Staff numbers in the year nearly doubled to 758
from 382 and cash on hand grew to $210 million from $78
million in the pcp.
Xero was a leading accounting software provider in New
Zealand and one of the leading online accounting software
providers in Australia and the United Kingdom, he said.
''With strong growth expected to continue in these markets,
Xero turns its focus on the important US market.''
The US market entry phase was completed successfully,
allowing Xero to raise an additional $180 million of capital
in October 2013, bolstering the board with the appointments
of New York-based Chris Liddell as chairman and San
Francisco-based director Bill Veght, and appointing Peter
Karpas as chief executive North America, Mr Drury said.
Goldman Sachs started its coverage of Xero with a sell
recommendation. Previously only two broking firms had offered
research on the company but its move into the NZX10 and a
range of international indices meant there would be a more
demand for information on its stock.
Goldman analyst Robbie Aitken said in a note while his
company acknowledged Xero's strong growth prospects and
product quality, investors were paying for significant
delivery in end markets.
''Previously, Xero provided a less expensive option to play
the growth in cloud accounting software, but at current
levels given, we believe investors are already paying over
Mr Aitken put a valuation on the stock of $32.23 a share.