The XERO FPO NZX (ASX: XRO) share price has continued its decline and is down 5% to $27.74 in morning trade.
This brings the accounting software provider's five-day decline to a disappointing 11%. And as far as one leading broker is concerned, there could be further declines on the way.
According to a note out of Credit Suisse this morning, its analysts have downgraded Xero to an underperform rating and placed a price target on its shares of NZ$29.80 ($26.96).
Its analysts appear concerned by Xero's valuation and how much future growth is being priced into its shares today.
Should Xero's shares fall to Credit Suisse's price target it would mean a decline of 3% from the current share price.
Should you sell?
Considering its incredible rally this year, taking a little bit of profit off the table could be a smart move. But I don't think investors should sell all their shares.
While I have been a touch underwhelmed by its slower-than-expected progress in the U.S. market, I believe it is just a matter of time before the company breaks through like it has in the United Kingdom.
Considering the size of this market, it has the potential to generate significant revenue growth for the company in the future. As does the Asian market where Xero is making good progress.
Should you buy?
I wouldn't be a buyer of its shares just yet. I do think profit-taking could drag its shares down over the next few months, which should create better buying opportunities.
So for now I would suggest investors keep their powder dry and consider other tech shares such as Nextdc Ltd (ASX: NXT).
