Xero Ltd (ASX: XRO) shares are having a big Friday session.
At the time of writing, the accounting software stock is up 8.36% to $88.56 after climbing as high as $89.54 earlier in the day.
It continues an impressive turnaround over the past month, with Xero shares now up around 35% during that period.
However, investors who have owned the stock since the start of the year are still playing catch-up, with the share price down around 22% in 2026.
So, could the shares be heading back towards $100?
Let's take a closer look.
Image source: Getty Images
Why are Xero shares surging?
According to The Australian, Xero is having its best trading day in around 2 months and is now testing a key resistance level.
The newspaper noted that trading volume was running 69% above average earlier on Friday, while the stock had reached a 3-month high.
There could also be some short covering helping the rally along.
Almost 5% of Xero shares were reportedly sold short last week, which was a record high. When a heavily shorted stock starts moving higher, some short sellers may decide to buy back their shares and cut their losses, which can add more buying pressure.
The Australian said the next level to watch is the June high of $89.69. If Xero can break through that level and stay above its 200-day moving average, further short covering could potentially push the shares closer to $100.
A massive turnaround from July
The rebound in Xero shares looks even more impressive when you look back just over a month.
The stock closed at $61.58 on 24 July, meaning it has now climbed more than 40% from that level.
The recovery has come during another busy stretch of news from the company.
At Thursday's annual meeting, chair David Thodey acknowledged the weak share price performance over the past year, but said the business itself continued to perform well.
He said weaker software valuations and investor concerns around the returns from the Melio acquisition had both weighed on the share price.
Management also pointed to a strong FY26 result, with operating revenue rising 31% to NZ$2.75 billion and adjusted EBITDA increasing 18% to NZ$757 million.
What should investors watch?
The next level to watch is around $89.69, which was the June high highlighted by The Australian.
If Xero can break through that level and hold above $90, it could give the rally another boost and force more short sellers to buy back their positions.
However, keep in mind that the stock has already covered a lot of ground in a very short period.
Thursday's low of $81.50 is another level worth keeping an eye on if some of the recent momentum starts to fade.
