Xero shares slip from favour

Last updated 17:32 08/04/2014

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Xero's share price continued to tumble today, dropping 11.50 per cent on the NZX, with one analyst blaming a "pack mentality" of US investors deserting tech stocks.

The cloud accounting company's share price lifted slightly last week, after Xero met its annual sales target by reporting an 83 per cent revenue uplift. But Xero shares resumed their slide today and closed down $4.10 at $31.50.

The former market darling has had its share price shaved by nearly 30 per cent in the last month.

One analyst said United States-based investors were profit-taking on many listed cloud-software firms which had filtered through to the NZX and hurt Xero.

Hamilton Hindin Greene director Grant Williamson said the IT sector was getting a profit-taking hit and Xero was especially exposed.

"It is quite common that a stock that has run up extremely strongly over a short period of time, when it does start to fall, a lot of shareholders rush in to take money out at the same time," Williamson said.

"Profit-takers are jumping over themselves to sell and make large profits off Xero.

"There was a lot of hype that pushed the Xero share price very high, but the fundamentals of the company are still the same."

Some investors would hold on to see what inroads Xero could make into the lucrative American market, but one rival was heavily discounting to gain market share, Williamson said.

Woodward Partners analyst Nick Lewis forecast on Friday that Xero shares could fall below $20 if it failed to crack the US market, but Xero founder Rod Drury responded it was far too early to tell about the US and he remained optimistic.

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- Fairfax Media

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