Xero shares surge on analysts upgrade
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The news: Shares in Xero climbed on the ASX as Jarden analysts upgraded their rating on the stock, describing the accounting software company as having "successfully transitioned from a startup to being self-funding".
The numbers: Jarden analysts upgraded their rating on Xero from 'neutral' to 'overweight', and significantly hiked their target price on the stock from $110 to $141.
The analysts also lifted their forecasts for Xero's earnings per share for FY24 (11%), FY25 (22%) and FY26 (20%).
Xero shares were trading 4.8% higher at $127.56 by 2:00pm AEST.
The context: Jarden analysts said that they refreshed their thesis on the ASX- and NZX-listed SaaS company after a "deep dive into its key drivers".
They noted that the New Zealand-based company is "now in a position to produce meaningful free cash flow as operating leverage emerges", opening up new opportunities including M&A and capital management.
They said their base case assumes Xero's revenue will almost triple over the next decade, with "asymmetric upside risk" to its valuation if it can execute above forecasts.
The analysts also believe Xero can start paying dividends by the 2025 financial year.
The source: Jarden research
