There are a lot of ASX 200 stocks to choose from on the local market, but one of the best to buy could be the stock in this article.
That is the view of analysts at Goldman Sachs, which are feeling very bullish about this company's long-term outlook.
Let's see what the broker is saying about this stock this morning.
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Which ASX 200 stock?
The stock that Goldman is bullish on is Xero Ltd (ASX: XRO).
Xero is a rapidly growing technology company that provides cloud-based accounting software for small businesses across the globe.
According to a note released this morning, Goldman Sachs believes that Xero is performing positively so far in FY 2025.
In the UK, the broker expects the company to benefit from the Phase 3 Making Tax Digital (MTD) initiative. There are also a number of other positives that have caught its eye. It explains:
We expect the industry to benefit from Phase 3 MTD in the UK (implementation from Apr-26) with 2.3mn small businesses not VAT registered, but specifically note that: (1) Launch of Xero Simple plans offer greater functionality, seamless migration (from non-VAT cashbook subs) and a reasonable price-point vs competitors; (2) QBO recent price rises across UK plans in-line with peerset; (3) Strong XRO UK Google trend performance vs comps; and (4) Further Xero ARPU potential from JAX looks positive, given strong Sage AI CoPilot early adoption (c11k) and monetisation (£10/mth).
Goldman also highlights that in the United States, the company's "BILL.com full-card transaction sync with XRO to support uptake in payments growth" and that Xero's "deepened partnership with Gusto allows users to solely operate in XRO ecosystem (vs Beta announced at 1H25 result)."
100 billion reasons to buy shares
But the main reason that Goldman Sachs is bullish on this ASX 200 stock is that it has a US$100 billion total addressable market.
Given that Xero currently generates annualised recurring revenue (ARR) of NZ$2.2 billion, this provides it with a significant growth runway over the coming decade and beyond.
Commenting on its buy recommendation, the broker said:
We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.
Goldman has a buy rating and $201.00 price target on the ASX 200 stock. This implies potential upside of 16% from current levels.
