A little over a week ago, Xero Ltd (ASX: XRO) shares were trading above $89.
Today, investors can pick them up for $72.32.
The cloud accounting stock is down another 2.60% on Tuesday, extending its weekly fall to around 13% and wiping out most of its August rebound.
Xero shares have now fallen roughly 37% in 2026 and almost 55% over the past 12 months, having traded as high as $166 over the past year.
That's a huge change in what investors are being asked to pay for the same business.
And while a falling share price doesn't automatically make a stock cheap, Xero is getting to a level where I think it deserves another look.
So, has one of the ASX's best-known growth stocks finally fallen far enough?
Let's take a closer look.
Image source: Getty Images
Why are Xero shares falling again?
The strange part is that there hasn't been a new earnings downgrade or major company announcement behind this week's fall.
Xero's latest updates have mainly been substantial shareholder notices, while its FY26 result was actually pretty solid.
Revenue rose 31% to NZ$2.75 billion, annualised monthly recurring revenue climbed 37% to NZ$3.27 billion, and subscribers increased 11% to 4.92 million.
The problem is that investors are looking past those numbers and focusing on the risks.
Melio integration costs helped push net profit down 27% to NZ$167.4 million, while gross margin fell from 89% to 83.9%.
There are also questions around what AI could mean for software businesses and whether higher interest rates will keep pressure on growth stocks.
So, I don't think this week's decline is about one bad piece of news.
It just looks more like investors are still asking how much they should be willing to pay for Xero's future growth.
Would I buy Xero shares?
At $72.32, I think Xero's valuation is starting to look a lot more reasonable.
Morningstar's quantitative valuation puts fair value at $102.60 per share, which is around 42% above the current price.
Of course, a valuation estimate is not a guarantee. Investors still need to watch Melio integration costs, margins, and whether AI changes the competitive landscape faster than expected.
But Xero still has nearly 5 million customers and plenty of room to grow internationally.
I would expect the share price to remain volatile in the short term.
But if I was investing with a 3-to-5-year view, I think Xero is starting to look like good value again.
