The Xero Limited (ASX: XRO) share price has continued its remarkable run on Tuesday.
In afternoon trade the cloud-based business and accounting software provider's shares are up a sizeable 9% to a new record high of $156.72.
This latest gain means the Xero share price is now up a sizeable 30% since this time last month and an even more mouth-watering 96% since the start of the year.
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Why is the Xero share price charging higher?
There have been a few catalysts for the rampant rise in the Xero share price this year.
This includes its strong performance during the pandemic, bullish broker notes, and its inclusion in exclusive indices.
In respect to the latter, on Friday afternoon S&P Dow Jones Indices announced its quarterly rebalance of the S&P/ASX Indices and revealed that Xero would be joining the ASX 50 index along with payments company Afterpay Ltd (ASX: APT).
These two market darlings will be replacing energy producer Oil Search Ltd (ASX: OSH) and retail property company Vicinity Centres (ASX: VCX).
Given that some investment companies have strict mandates on the shares they can buy, this change has potentially brought Xero onto the radar of some fund managers.
In addition to this, it will also have led to index-tracking funds having to buy shares.
Can the Xero share price go higher?
As I mentioned above, the Xero share price was also given a boost from bullish broker notes over the last few months.
One of the most bullish notes came from Goldman Sachs earlier this month. It initiated coverage on the company with a buy rating and $157.00 price target.
At the time, this price target implied potential upside of 18% for its shares. However, with the Xero share price now fetching $156.72, the upside appears limited from here.
Goldman Sachs likes Xero due to the quality of its offering, its large and growing total addressable market (TAM), and its attractive unit economics.
The broker estimates that its TAM is already worth NZ$14 billion across its key markets but could grow by a further NZ$62 billion in the future. Goldman believes this would be possible if it broadens and monetises its app ecosystem and expands into new geographies.
