The Xero Limited (ASX: XRO) share price has dropped into the red on Thursday following a broad market selloff.
In afternoon trade, the cloud accounting platform provider's shares are down 2.5% to $73.72.
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Where next for the Xero share price?
While the Xero share price hasn't had a great start to the month, analysts at Goldman Sachs believe things could get better. Particularly if Xero delivers some strong numbers next week when it releases its half year results for FY 2023.
According to the note, ahead of next week's release, the broker has retained its buy rating and lifted its price target slightly to $112.00.
Based on the current Xero share price, this implies potential upside of 52% for investors over the next 12 months.
What did the broker say?
Goldman highlights that trading conditions appear to have been solid based on a recent update from rival Intuit (Quickbooks). It commented:
Near-term industry momentum solid: with Intuit upgrading 1Q23 revenue growth guidance to be >25% in the quarter given SMB/Tax strength (vs. GSe XRO 1H23 rev +28%). This is supported by positive top-line visitation / engagement datapoints with: (1) 2Q23 visitation share stable to improving – we highlight Canada (+ve) & UK (improved post recent weakness); and (2) App downloads remaining solid with robust AUS growth, consistent performance in UK/NZ/ROW while Planday is softer.
However Xero App integration numbers declined in each region which followed the transition to the new app-store and fees across all apps in Aug-22 (prev. just new). Finally we note Xero cost growth appears to be moderating with Nov-22 job vacancies for Xero at c.35% of PcP levels, noting employees are the largest portion of XRO's cost base.
All in all, based on the above, the broker is expecting a solid half year update next week and sees plenty of value in the Xero share price at current levels.
