Xero (ASX:XRO) share price rises on app store news and broker note

Xero shares are pushing higher on Thursday…

| More on:
A hipster dude leaps in the air with glee, seeing positive news on his tablet.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Xero Limited (ASX: XRO) share price has been a positive performer on Thursday morning.

At the time of writing, the cloud accounting platform provider's shares are up 2% to $148.70.

Why is the Xero share price pushing higher?

The catalyst for the rise in the Xero share price on Thursday appears to have been a positive broker note out of Goldman Sachs.

According to the note, the broker has retained its buy rating and $165.00 price target on the company's shares.

Based on the current Xero share price, this implies potential upside of 11% over the next 12 months.

What did the broker say?

Goldman notes that Xero has launched the Xero App Store across the ANZ and UK markets. This is part of the company's plan to streamline and simplify access to the ~1,000 apps currently available in its ecosystem.

Much like the Apple App Store and Google Play Store, this change has seen a 15% app store fee introduced for app subscriptions purchased through it store. This means that from today, new apps will incur these charges, while existing applications will be migrated onto the new terms over the next 12 months. App store partners that sell directly to Xero customers through other channels will not be required to pay the 15% app store fee.

A positive step

Goldman Sachs has previously stated that it is bullish on the Xero share price partly due to its belief that the monetisation of its app ecosystem has the potential to underpin very strong revenue growth over the next decade and beyond. As a result, the broker sees this move as a positive step.

It commented: "We see this as a positive step from Xero, which is increasingly focused on monetizing its strong market positions within the ANZ and UK markets, with the incremental revenues used to accelerate its ongoing global expansion."

"We previously outlined our belief that a 10-15% app-store fee was possible for Xero, given this would provide consistency across the Xero app developers to incentivize continued investment, while being comparable to a number of digital marketplaces globally who have app fees ranging from 12% (Epic Games) to 30% (Apple, Google, Steam, etc)."

"Although the quantum of app attachment rates is uncertain, we estimated that a 15% app store fee could open up an incremental NZ$1.4bn of TAM, with these earnings likely to be 100% margin," it added.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »