Its shares yesterday dipped below $20 for the first time in a year, down 8.4% to $19.20, and down more than 55% since they peaked at $45.99 in March.
Brokers at Craigs Investment Partners and Forsyth Barr are critical of the lack of traction from Xero's key target market, and have downgraded target prices.
While Xero has more than $170 million cash in hand to progress its growth, Craigs Investment Partners' research has highlighted its disappointment in US growth.
Craigs broker Chris Timms said while Xero delivered strong overall growth for the first half of 2015, that was driven mainly by Australia and New Zealand, which were two ''relatively small addressable markets''.
''Growth was extremely weak in the US in the first half with just 4000 customers added,'' Mr Timms said.
Xero's US customers increased by 4000 to 22,000 during the half.
The rate of growth was flat on that a year ago, and was tracking below Craig's bottom-of-the-market full-year forecast of 42,000, even allowing for seasonality, Mr Timms said.
Craigs is maintaining a ''sell'' recommendation on the stock and reducing the target price from $18.90 to $18.50.
Forsyth Barr has downgraded its target price by $1.25 to $20.50, while maintaining an ''underperform'' recommendation.
Forsyth Barr broker Haley Van Leeuwen said the slow progress in the US overshadowed the otherwise strong growth in Australia.
''With expectations for Xero heavily influenced by potential US success, there will be disappointment with these numbers,'' Ms Van Leeuwen said.
She said estimated earnings for full-year 2015 had after-tax profit down 5.6% to a loss of $50 million, full-year 2016 down 5% to a $94 million loss and full-year 2017 down 5% to a $125 million loss.
She said the US had 28 million small to medium-sized enterprises with 20 employees or fewer, which was the largest potential market for Xero.
''[However] we believe Xero will not be ready to push aggressively into the US market until full-year 2017, as it completes its product line-up and ramps up its sales channel,'' she said.
''The US market remains key for Xero,'' she said.
Mr Timms said there did not appear to be any ''quick fixes'' for Xero in the US.
It had to develop a full product suite customised for the market, including accounting, payroll, payments and, in Craig's view, tax.
It had to build out a management team and prove that a mainly direct, online sales strategy could work in a market where Xero had limited brand presence, as opposed to the accounting channel sales model Xero had relied on ''with great success'' in New Zealand, Australia and the UK, he said.
Craigs had reduced its overall full-year 2015 year-end customer forecast, down from 496,000 to 487,000, driven entirely by the US where the expectation fell from 42,000 customers to 33,000, which meant a 10% decrease to the estimated full-year after-tax profit down to a $44 million loss.
''We have also pushed out by a year our expectations for Xero's growth ramp in the US, leading to decreases in later years also,'' Mr Timms said.
Ms Van Leeuwen said while Australasian growth was critical for Xero to maintain its momentum in the near term, it would be the UK and US markets which were the focus and ''will determine its fate''.
''Ordinarily, this would be a positive story for a company seeking high growth. However, the underlying mix, with growth primarily from the more established Australasian markets, is negative.
''Reduced US volumes after a lacklustre first half 2015 will flow through future years and impact growth in that market,'' Ms Van Leeuwen said.
The company faced aggressive competition from incumbent Intuit, which runs QuickBooks, BusinessDesk reported. In July, chief executive Rod Drury told shareholders at the annual meeting in Wellington that everything Intuit did was now in response to Xero, and conversion of its 5 million desktop customers to the cloud would not work.
However, some analysts have questioned whether the company has just shown its competitor what it needs to do to keep market share.
''People are suggesting that the rate of growth in the US is at a level which is probably less than they thought it would be and they're certainly aware that Intuit is growing very quickly in that competitive marketplace,'' said Rickey Ward, NZ equity manager for JB Were, which does not hold the stock.
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