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Volatile Xero drops on loss news

Tech company Xero has plunged a day after it announced a doubling of its half-year net loss.

Xero shares (NZX: XRO) dropped 4.65% by 3.30pm today to $5.95, cutting into gains made after last week's dual listing on the ASX.

It also wiped more than $30 million off the company's value, with the market capitalisation now standing at $638 million.

The company's shares started the year at $2.76.

Hamilton Hindin Greene director Grant Williamson says the larger loss announced yesterday was expected and weak offshore markets might have also hastened Xero's decline, as investors sell out of risky stocks.

"Stocks that have performed the best normally do come under a bit of pressure as soon as the international markets start to weaken.

"It's not anything out of the ordinary, and if Wall Street picks up tonight, we'll probably see Xero pick back up again."

Mr Williamson says Xero gained 8.6% on Monday and last Thursday it was up 6.4%, while on one day in August it had a 5.9% drop.

"It is quite a volatile stock on the upside and the downside."

Xero ceo Rod Drury told NBR ONLINE yesterday the company is "absolutely in the growth phase" and its investments will drive a profitable business in the long term.

More by David Williams

Comments and questions

When it drops another $4 it might be fair value.

Volatile? With a few thousand shares sold daily the stock price is set by one or two trades, if something does spook investors it would be easy to see a 30% haircut as the public rushed for the exits.

Investors just have to be sensible, realize that whilst growth keeps going and we do not have a catastrophic internet outage the shares could keep heading up. But is it really worth almost half of Fisher and Paykel Healthcare, you be the judge. Personally use Xero, but not an investor.

The Aussie market will cane this stock

They are more sophisticated investors and can smell a dog from a mile off

How is it Xero keep saying its competitor MYOB is overvalued at just under twice that of itself ($1.2b sale last year to Bain)? Yet MYOB generates 10 times Xero's revenue and makes serious margin on it. Is it just me, or does that seem odd?

Or am I missing something that could've seen me buy in at $2 last year and sold at $6