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Xero One Of The Best Performing Stock Tops Today’s Session

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Xero (ASX: XRO) rallied 7.71% today on the back of a coronavirus-fueled selloff in the last few days. The company was the best performing stock in the ASX in today’s session followed by Bega Cheese and Clinuvel Pharmaceut. This is after coming off one of the fastest corrections in history as COVID-19 reaches pandemic proportions. Despite the constant bombardment of the coronavirus news, Xero is relatively resilient to COVID-19 and continues to be used by small to medium-sized businesses.

Xero produces online accounting software and is the favored cloud-based solution of a large share of the industry. The company offers its software to small and medium-sized enterprises and develops a strong recurring revenue stream through high switching costs. Xero’s expansion into the US market weakened all major competitors since the company was able to take a large share of the market. Differences in US tax laws have weakened the value proposition of Xero’s accounting software, but the company’s larger customer base gives them more capital to reinvest in software improvements.

What differentiates Xero from other competitors is its loyal database and open-architecture platform which allows 3rd parties to develop on its platform. This further improves the application as history shows that knowing what customers want is a competitive advantage since they’re the ones using the platform.

The company’s three top plans range from $25 to $65 a month, a figure which we believe can increase substantially over time. The current low-cost pricing strategy is reflective of the land grab currently at play in the industry and will be reversed over time as Xero digs deeper competitive moats around their business


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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