Xero Ltd (ASX: XRO) shares are starting to turn, with momentum building after a period of heavy selling across the tech sector.
The stock is now lifting off recent lows, and the price action is beginning to look more stable.
At the time of writing, the Xero share price is up 1.29% to $83.04. That move comes after the stock hit a multi-year low of $67.93 on 30 March, before rebounding and holding above that level in April.
The shares later came close to that low again, dipping to $69.11 on 13 April, but buyers stepped in before it was retested.
That kind of price action usually points to selling pressure easing.
Here's what this setup could be telling investors.
Image source: Getty Images
Why the sell-off went too far
The weakness over the past year has been very clear. Most of it has been driven by a broader de-rating across global growth stocks, not a change in Xero's core business.
The company continues to expand its global subscriber base and lift revenue, supported by its position as a leading cloud accounting platform for small businesses.
The platform is deeply embedded in day-to-day operations. Once it is in place, it is difficult to replace, which supports recurring revenue and pricing over time.
There are also signs the cost side is improving. Hiring has slowed, which points to better discipline after a period of investment and should support margins into FY26.
The chart is starting to shift
The technical setup is becoming harder to ignore.
Xero hit a low in late March and has since held above that level. That is normally where things start to change. More recently, the stock has started to push higher, with short-term buying starting to pick up.
This pattern has also been showing up across the sector. Several ASX tech names such as Wisetech Global Ltd (WTC) have rebounded after trading near oversold levels earlier in the year.
What could drive the next leg higher
The macro environment is still creating noise, particularly around geopolitical developments and changing expectations for global growth.
But these conditions tend to move quickly. When sentiment turns, it often turns fast.
If markets begin to stabilise, the focus is likely to return to earnings and growth, where Xero still has clear levers. That includes subscriber expansion, pricing, and further development of its payments and ecosystem strategy.
With the share price still well below previous highs, even a modest improvement in conditions could have a strong impact.
Foolish takeaway
The recent price action suggests the worst of the selling may already be behind Xero shares.
The stock has found a low, held above it, and is now pushing higher, while the broader tech backdrop is starting to improve.
For me, this looks like the early stages of a recovery.
If that trend continues and is supported by Xero's upcoming results on 14 May, the re-rating could still have further to run.
