After hitting a peak of $42.20 – and valuing the company north of
$4.5 billion – just a month ago, Xero shares hit $29.20 shortly before
the market closed on Tuesday.
This caps off a 20.5 per cent slide in the past week alone, indicating the Auckland-based company won’t be shielded from fears that tech companies are trading above their worth.
The global sell-down comes at a bad time for Xero, which last week announced a significant increase in customer numbers and revenues but a doubling in losses for 2013 as the software maker pumped any earnings back into its aggressive expansion in Australia and the United States.
Though executives have maintained that investors understand the need to invest at the expense of short-term profitability, the recent sell-down indicates perhaps the market isn’t so sure.
Of course, those who bought into the company early into its listing on the Australian Securities Exchange are still sitting pretty, with shares increasing 520 per cent since November 2012.
Yet the question remains as to when investors will see dividends from their investment. Analysts don’t expect Xero to start showing positive earnings until 2016 at the earliest, and this week said customer numbers weren’t growing as quickly as hoped. Observers say Xero is trading far above where it should sit.
“The excitement that was expressed in the share price above $40 was entirely understandable if a little over-enthusiastic,” said Michael McCarthy, chief markets strategist at CMC.
“It’s like being back in 2000 – we know there’s potentially a very good business here. It looks like they’ve found a path to it. Now the question is: can they deliver? . . . I suspect we’ll see further price falls before this stock settles.”
This story originally appeared at afr.com.au
This caps off a 20.5 per cent slide in the past week alone, indicating the Auckland-based company won’t be shielded from fears that tech companies are trading above their worth.
The global sell-down comes at a bad time for Xero, which last week announced a significant increase in customer numbers and revenues but a doubling in losses for 2013 as the software maker pumped any earnings back into its aggressive expansion in Australia and the United States.
Though executives have maintained that investors understand the need to invest at the expense of short-term profitability, the recent sell-down indicates perhaps the market isn’t so sure.
Of course, those who bought into the company early into its listing on the Australian Securities Exchange are still sitting pretty, with shares increasing 520 per cent since November 2012.
Yet the question remains as to when investors will see dividends from their investment. Analysts don’t expect Xero to start showing positive earnings until 2016 at the earliest, and this week said customer numbers weren’t growing as quickly as hoped. Observers say Xero is trading far above where it should sit.
“The excitement that was expressed in the share price above $40 was entirely understandable if a little over-enthusiastic,” said Michael McCarthy, chief markets strategist at CMC.
“It’s like being back in 2000 – we know there’s potentially a very good business here. It looks like they’ve found a path to it. Now the question is: can they deliver? . . . I suspect we’ll see further price falls before this stock settles.”
This story originally appeared at afr.com.au
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