The Xero Ltd (ASX: XRO) share price has been on a rough run in recent months, falling close to 30% from its highs. For a company long seen as one of the premium tech names on the ASX, the pullback has caught the eye of many investors, including me.
At yesterday's market close, Xero shares were changing hands for about $114. It has been nearly two years since the stock traded this low, and analysts continue to place their estimates much higher than that.
Which brings us to the obvious question: has the market gone too far, or is this a rare chance to pick up a high-quality growth stock at a serious discount?
Why has the Xero share price struggled?
Unfortunately for Xero investors, the recent slide hasn't come out of nowhere. The company has faced a combination of headwinds, including slower subscriber growth in important regions, higher operating costs, and rising competition. With small-business conditions softening as well, several brokers cut their price targets, which weighed further on the Xero share price.
There were also concerns that Xero's margins might take longer to improve than previously hoped, especially with the company continuing to invest heavily in product development and AI features.
Has the market priced in too much bad news?
Despite the slump, Xero remains a high-quality, global business with a long runway ahead of it. The company continues to grow revenue at a solid pace, subscriber numbers remain strong overall, and long-term adoption of cloud accounting software still has plenty of room to expand, particularly in the UK and North America.
Several analysts have flagged the recent sell-off as overdone. Current broker price targets generally sit between $145 and $170, with Macquarie going as far as tipping nearly 90% upside from current levels.
Xero has also been trimming costs, making the business more efficient, and being more selective with its spending.
What could help improve sentiment
A few things may help shift the market's view over the next 12 to 18 months, including steadier subscriber growth in major markets, stronger margins, continued interest in Xero's AI-driven tools, and improving conditions for small businesses.
If Xero can show clear progress across these areas, it wouldn't take much for investor confidence to quickly rebuild.
So, is this a buying window for long-term investors?
A 30% pullback in a high-quality tech company is not something you see very often. Xero remains a global leader in a subscription-based market, with a long runway still ahead of it.
Whether this turns out to be one of those buying moments will depend on what management delivers next, but at these levels, the Xero share price is starting to look much more appealing for long-term investors.
