Xero Ltd (ASX: XRO) shares have tumbled into the red in Tuesday morning trade. At the time of writing, the ASX tech shares are down around 2% to $60.27 a piece.
The shares have now fallen 11% over the past month. They're also down around 46% for the year to date and are a huge 61% lower than 12 months ago.
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Why are Xero shares still falling?
There hasn't been any price-sensitive news out of Xero over the past couple of months. The latest decline is mostly a continuation of existing headwinds.
Xero shares rallied to a six-month high in late August after the company attracted investor interest and rolled out new AI-powered tools. In mid-August, the company announced significant product updates across its payments, payroll, and bookkeeping offerings in the US.
At the time, many investors were impressed that the company had successfully turned the threat of AI into an enterprise growth driver.
Much of the tech-sector-wide sell-off this year was driven by concerns that AI could replace the core services of companies like Xero.
But as quickly as the shares spiked, they tumbled again. There isn't any clear indication why, so it's most likely a combination of renewed macroeconomic pressures and investors taking their gains off the table after a strong rally.
Over the past month, a fresh round of macroeconomic shocks, including an interest rate hike in late September and sky-high Australian bond yields, has also created strong headwinds for an already dampened Xero share price.
Xero also recently locked in the 12th of November as the date for its upcoming half-year FY27 financial results, for the six months ending 30th of September.
It's not uncommon for investors to sell up shares in companies that have the potential for risk in upcoming financial updates.
This is particularly true for Xero, as investors are still focused on its Melio acquisition in the US. There are ongoing concerns about how the acquisition will affect the company's near-term margins.
Are Xero shares a buy, sell, or hold?
Investors may be spooked, but the experts are much more confident that we'll see a rebound ahead for Xero.
Market Index data shows the majority of brokers have a buy rating on the stock. The $112 average target price implies an upside of around 84%, at the time of writing.
Data is also very positive on TradingView. All nine analysts have a buy/strong buy rating on Xero shares. The $119.13 average target price implies an upside of around 97%. But some think the shares have the potential to jump 181% higher to $169.71 each, at the time of writing.
If analyst forecasts are anything to go by, now is a good time to buy Xero shares in the dip.
