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The stock of New Zealand-based software-as-a-service company Xero (ASX: XRO) soared by as much as 4.79% to AU$127.54 apiece on 16 May 2024, marking its highest level since 3 April. This surge positioned Xero as the top gainer on the Australian technology sub-index, which itself experienced a notable increase of 3.32%.
Analysts at Jarden have upgraded Xero from a "neutral" to an "overweight" rating, while also revising its price target upward to AU$141 from AU$110. This bullish sentiment reflects Jarden's confidence in Xero's transition from a start-up to a self-funding entity, now capable of generating significant free cash flow while effectively balancing growth and profitability.
The brokerage highlighted Xero's larger scale and robust free cash flow generation as key factors opening up new avenues for growth, including opportunities for mergers and acquisitions (M&A) and capital management strategies. Jarden further anticipates that Xero could initiate dividend payments as early as the fiscal year 2025, signaling a significant milestone in the company's evolution.
Xero is slated to announce its earnings on 23 May, with Jarden forecasting a robust 21% growth in revenue for the fiscal year 2024. The brokerage also predicts Xero to report a net profit after tax (NPAT) of NZ$162 million (equivalent to $99.18 million). This optimistic outlook underscores Jarden's bullish stance on Xero's financial performance and growth trajectory.
As of the last trading session, Xero's stock has demonstrated a solid year-to-date increase of 8.4%, reflecting investor confidence in the company's prospects and its ability to capitalise on emerging opportunities in the software-as-a-service sector.
