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Xero share price up as it wins single biggest client ever

ASX share price rise represented by two investors high fiving
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The Xero Limited (ASX: XRO) share price hit a record high of $70.53 this week after the online accounting platform revealed it has snared global top-10 accounting firm RSM Australia as a client.

According to Xero the partnership will represent the single biggest migration to Xero’s platform ever, with RSM having one of the largest SME client bases in Australia. In total it has more 30 offices  and “tens of thousands” mid-market clients in Australia.

Xero is due to hand in its FY 2020 interim results on November 7 and will likely reveal it has blown past more than 2 million subscribers globally. 

The good news doesn’t end there though, with Xero also recently announcing a partnership deal with South African CRM and accounting software provider GreatSoft. It also serves large accounting firms globally including RSM.

More generally Xero is now pushing aggressively into the South African and Canadian markets, with any widening of its online accounting ecosystem via partnerships welcome news. 

Amongst the WAAAX stocks I still think Xero and Altium Limited (ASX: ALU) look the best bets as they are both delivering the best organic growth. Xero perhaps has the most raw upside, while Altium is already highly profitable, expanding margins, and meeting aggressive growth targets. 

Elsewhere, Afterpay Touch Group Ltd (ASX: APT) has tumbled this week on the back of concerns its business model does not boast much of a moat, while it may also face tighter regulation going forward. 

WiseTech Global Ltd (ASX: WTC) has tumbled after a short seller pointed out how much of its growth has been achieved via a roll-up strategy that included capital raisings to acquire its growth. It generally pays to be cautious of companies undertaking excess acquisitions and capital raisings. 

Growth that involves financial alchemy and capital raisings can lead to valuations that are not much more than mirages.

As such WiseTech has a public relations battle on its hand next week. 

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Tom Richardson owns shares of AFTERPAY T FPO, Altium, WiseTech Global, and Xero.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Altium, WiseTech Global, and Xero. The Motley Fool Australia has no position in any of the stocks mentioned. 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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