Here’s why the Xero share price is nearing $50

The Xero Limited (ASX: XRO) share price jumped 2.2% to $49.59 this afternoon as investors bet the online-only accounting platform is set to deliver strong financial results for the six-month period ending March 31 2019.

The stock is up around 40% over just the past year as it continues to add subscribers to its cloud accounting platform at strong rates in Australia, New Zealand, the UK, US, South Africa and Singapore among other countries.

In total it had nearly 1.6 million subscribers as at 30 September 2018 having added 193,000 over the preceding half year period, with the group due to report its latest subscriber numbers this May when it hands in its results for its fiscal year ending March 31 2019.

Xero is a software-as-a-service business and has all of its key metrics such as user numbers, average revenue per user, lifetime value, gross margins, and churn (customer turnover) tracking in the right direction to suggest it could spin big profits long into the future.

Despite the strong share price run, if I didn’t already own some Xero shares, I’d be a buyer as I continue to like its outlook. Others to consider in the now hot SaaS space include WiseTech Global Ltd (ASX: WTC), or Pro Medicus Limited (ASX: PME), although on current valuations I’d still prefer Xero and would not be surprised to see it hit $100 within a few years.

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Tom Richardson owns shares of Pro Medicus Ltd. and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of WiseTech Global and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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