Xero Ltd (ASX: XRO) shares are closing out a financial year to forget.
On Tuesday, shares in the S&P/ASX 200 Index (ASX: XJO) business and accounting software provider were trading for $72.65 apiece.
Despite a modest rebound over the last week, that sees the Xero share price down a sharp 60.1% over the past 12 months.
Some of the selling pressure has been spurred by broader global market concerns over the potential for artificial intelligence, or AI, to relatively cheaply replace the services that Software as a Service (SaaS) companies like Xero provide.
Or the so-called 'SaaSpocalypse'.
But Fairmont Equities' Michael Gable believes Xero has more to overcome than just investor AI jitters before the ASX tech stock could resume long-term share price growth (courtesy of The Bull).
Here's why.
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Xero shares: Buy, hold or sell?
"We have been negative about the Australian technology sector since 2025, and rotated into resource stocks," Gable said.
"Increasing interest rates so far in 2026 amid high sharemarket volatility and uncertainty leaves investors questioning the outlook of technology companies trading on relatively high multiples," he added.
As Gable points out, higher interest rates tend to drag on growth-oriented tech stocks like Xero. That's because these companies tend to be priced with higher future earnings in mind (trading on high multiples). And as rates go up, so too does the present cost of investing in those future earnings.
Indeed, with the RBA rotating to interest rate increases in Australia, the S&P/ASX All Technology Index (ASX: XTX) has slumped around 25% over the last year.
As for Xero shares, Gable expects the ASX 200 tech stock could have further to fall.
Summarising his sell recommendation, he concluded:
In our view, the share price of Xero, an accounting software provider, hasn't sufficiently rallied on recent positive announcements. Consequently, it indicates the stock remains under selling pressure.
What's the latest from the ASX 200 tech stock?
Xero reported its full year FY 2026 results on 14 May, covering the 12 months to 31 March.
On the positive side of the ledger, the company achieved a 31% year on year increase in operating revenue to $2.75 billion.
And adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of $757.4 million were up 18% from FY 2025.
Earnings and revenue both got a boost from Xero's acquisition of US bill pay platform Melio during the year.
But the Melio acquisition costs also weighed on profits. Xero reported a net profit after tax of $167.4 million, down 27% from the prior year.
Xero shares closed down 9.0% on the day of the results release.
