Is the Xero (ASX:XRO) share price heading down to $130?

This tech share has been tipped to fall. Here’s why…

| More on:
Young man in shirt and tie staring at his laptop screen in anticipation.

Image source: Getty Images

The Xero Limited (ASX: XRO) share price has been on form over the last 12 months.

Since this time last year, the cloud accounting platform provider’s shares have risen a sizeable 61%.

Can the Xero share price keep rising?

One broker that isn’t convinced the Xero share price can keep rising is Macquarie Group Ltd (ASX: MQG).

In fact, according to a note out of the investment bank last week, its analysts believe its shares could be heading lower from here.

The note reveals that Macquarie has retained its underperform rating and $130.00 price target on the company’s shares.

Based on the current Xero share price of $146.40, this implies potential downside of 11% over the next 12 months.

What did the broker say?

The broker notes that rival Intuit has announced the US$12 billion acquisition of email marketing company Mailchimp.

Macquarie fears this could be a boost to Intuit’s QuickBooks platform and a blow to Xero if it decides to remove Mailchimp from Xero’s ecosystem. The broker appears concerned that it could not only cause some users to switch platforms, but also strengthen QuickBooks’ offering and support its global expansion.

Outside this, the broker has valuation concerns and struggles to justify the current multiples the Xero share price trades on.

Particularly given its view that its ANZ growth will slow materially in the near future and its North American growth may come at the expense of a softening revenue per user metric.

Is anyone bullish?

The team at Goldman Sachs don’t agree with this view. They recently reaffirmed their buy rating and $165.00 price target.

The broker believes Xero has the potential to grow strongly for several decades if everything goes to plan with its global expansion and app ecosystem monetisation.

Time will tell which broker made the right call.

Should you invest $1,000 in Xero right now?

Before you consider Xero, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Xero wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

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 Macquarie Group Limited and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes