Cloud accounting company XERO FPO NZ (ASX: XRO) is one of the most exciting companies around; still in its youth and with a long runway ahead of it. However it has not all been smooth sailing and the company has suffered its share of growing pains. Here are six things only long-term Xero investors will truly understand:
1. Learning to cope with a manic depressive share price
If you want to know about share price volatility ask a Xero shareholder. Shares in the company shot to a record high of $42 in March last year before plummeting 66% to $14 in November and starting their climb again. Steadying yourself in the face of such extremes can be challenging, but is something Xero shareholders have to cope with.
2. That growth comes at a price
As the family motto in Transformers goes: "No sacrifice, no victory".
Despite the regular lashing the company gets on online message boards over not turning a profit, Xero investors understand that the company has a clear strategy for growth and that the growth comes at a price. Reoccurring revenues means money spent to win customers today could be worth much more in years to come.
3. There will be hiccups along the way
If my younger years are anything to go by, growing up can be a clumsy and awkward process. We try hard, but there are invariably cock-ups along the way. Xero is a young, rapidly growing company and long-term investors understand the company will have its stumbles too.
4. Xero's beef with MYOB
Xero founder and CEO Rod Drury was openly critical of the listing of rival Myob Group Ltd (ASX: MYO) and questioned the company's prospectus customer numbers. Xero and MYOB are each fighting to win over the small-business market in Australia and the added noise would have likely helped to raise brand awareness for Xero.
5. Just how good the product is
Few would ever think the word 'beautiful' could be used in the same sentence as 'Accounting software'. But a big reason Xero is achieving such strong growth is because of the gorgeous simplicity and user-friendly nature of the product. If you're a Xero investor, you understand.
6. That Xero may have already one the fight
According to Motley Fool PRO analyst Matt Joass, Xero may have already won the fight against MYOB and Reckon Limited (ASX: RKN). As Matt writes here, Xero dominates in Google search terms against MYOB and Reckon, which he likens to the emergence of Facebook over MySpace.
