2 May 2013

Xero shares continue southwards

8:09 pm on 2 May 2013

Shares in the market darling, Xero, have continued to lose value.

The accounting software company's shares have lost $2.40, or more than 16% in the last two days and closed on Thursday at $12.50 after earlier sinking as low as $11.50.

In a recent report, a Forsyth Barr senior equity analyst, Andrew Harvey-Green, says one of the fundamental reasons Xero's shares have performed so well has been that the company continues to meet expectations on the revenue and customer number front.

Xero ended March with 157,000 customers and Mr Harvey-Green is forecasting it will have 279,000 customers in 12 months time.

He says its performance has been giving investors a degree of confidence that it may be a success story.

Even so, he expects Xero will report a $14.8 million loss for the year to the end of March and that its loss in 2014 will be even higher at $20.7 million.

Mr Harvey-Green says it's still very early days for Xero which is investing heavily in Australia, the US and UK and all businesses need to invest ahead of getting the rewards if it's a success.

He says long-term whether Xero is successful in the US will be a key factor in the company's success.

Mr Harvey-Green values Xero shares at $11.80, well below the current share price.