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MM thoughts on XRO

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MM thoughts on XRO

What is your thinking on XRO given that it is increasing pricing on all its plans; viz. Standard $2.00 p/m = $24.00 p/a which multiplied over it vast number of subscribers (worldwide about 3 million) will produce multi millions in extra revenue? Will this make your $160 estimate look very conservative?



Hi John,

As a customer I have noticed the fee changes. Ultimately, MM remains bullish Xero (XRO) but we must remain mindful that the stock is already priced for significant growth / revenue lift which stems from increasing prices but also the number of services offered.It’s a well trodden path in the subscription space, grow a big pool of users, gradually increase prices to grow margins then introduce other products or services to leverage the customer base further.

From a share price perspective,  we’ve seen twice in the last 2-years XRO is very capable of correcting over 30% when growth plays go out of vogue hence we will consider taking some icing off the cake when our target area is achieved. We had a 5% initial weighting which has obviously grown to be more like 7% in real terms.  We remain bullish looking for a break of $160.

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