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XRO, XERO LIVE LIMITED
blacksheep
post Posted: Aug 1 2018, 08:06 PM
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In Reply To: nipper's post @ Aug 1 2018, 06:39 PM

This is how he explained his "$100 billion number "

QUOTE
The $100 billion number

The biggest debate in the office came about because of my $100 billion number as an end-game market cap. In some sense that is the big-hairy-audacious-goal (BHAG) for any putative tech giant.

But in this case thinking about how you get there explains it pretty well and also explains to some degree what the company needs to do.

Xero currently has about a million customers paying on average about $400 per year each. We pay a bit more mostly because we transact some of our business in foreign currencies and as we add optional features we would expect to pay more still. We would expect revenue per customer to grow over time and think $600 is not unrealistic. At least some of the customers become bigger over time. We know one 200 person business who runs the entire thing on Xero. Their next transition would typically be to Oracle accounts - but they do not feel this is necessary.

To get to $100 billion in market cap you probably need $15 billion in revenue at some point. Even that is fairly expensive at 7x revenue - but most of the tech giants trade at about 7x revenue.

At $600 per customer that means you need 25 million customers. To get to my BHAG Xero needs 25 million customers. It needs to be 25 times bigger.

My first cut was simple. Xero has the bulk of the market in New Zealand - its home market - and about a third of the market in Australia. It has a small market share in the UK and a tiny market share in the US. Australia is about 2 percent of the world - and so Xero could - if it got to this market share globally - be 50x bigger.

It is a superior product, mission critical and sticky. This seemed plausible to me.

Then one of my staff members pointed out that there are less than 6 million incorporated businesses in the US. And sure this doesn’t count sole-traders but it does make my 25 million customer target seem hard.

This of course led to a debate. How is it possible to have a million customers mainly in Australia and New Zealand (very small countries economically) and there only be a target market of about 6 million customers in the US.

The first answer was the one alluded to above which is that Australia and New Zealand both have value added taxes which means that everyone with any private business has to file regular tax statements and the vast bulk of them use software to comply. This will apply in Europe too. Xero should have gone to Europe before going to America.

The second answer (which I would love to confirm) is about the structure of the US economy versus countries without large pools of low-income labour. In the US there is a vast pool of labour at approximately $10 an hour which is lightly skilled. Many businesses work out how to leverage an entrepreneur’s talent through using dozens of these people. The average restaurant in America is much larger than the average restaurant in Sydney - and leverages one executive chef over many staff. By contrast this low-income labour pool barely exists in Australia - and of consequence I suspect the average small business is smaller and there are many more of them. Australia, not America is a land of thriving small businesses (at least by number).

I suspect the same is true in Europe. Indeed in Europe in many jurisdictions there are penalties for businesses getting too big. France for instance has different labour laws for companies that employ more than 50 people rather than less than 50 people and many businesses deliberately stop growing under that threshold. My guess is that the market is again relatively bigger in Europe than America. Just because there are more potential customers.

In all cases it leads me to the conclusion that Xero has focussed its energy wrongly (on trying to grow in America) rather than going to countries where it is a natural fit.

Done well though I think there are 25 million customers out there to win. Whether they can do it - that is yet to be seen.




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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Aug 1 2018, 06:39 PM
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In Reply To: blacksheep's post @ Aug 1 2018, 05:37 PM

QUOTE
.... the potential to be a $100 billion global tech behemoth.

As the market cap is less than USD5 billion now I am saying a 20 bagger is possible.

- in a perfect world. But there's going to be capital raised (= dilution) to fund that growth along the way, I'd reckon



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
blacksheep
post Posted: Aug 1 2018, 05:37 PM
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In Reply To: nipper's post @ Jul 30 2018, 08:55 AM

Bronte Capital's blog on XRO
extract - see link for complete article - http://brontecapital.blogspot.com/2018/08/...1.html?spref=tw
QUOTE
Xero
I was quoted in the Australian Financial Review on Monday stating that Xero is the only Australian company with the potential to be a $100 billion global tech behemoth.

As the market cap is less than USD5 billion now I am saying a 20 bagger is possible.

The $100 billion number was a matter of some dispute in the office - and a discussion is in the appendix. However suffice to say there is huge upside provided it all works.

Xero however have a few hoops to jump through on that path. This post is to explain my view and also what I hope management improve. I do not think they have done a great job of it so far (even though the stock and business have been a success).

But for the uninitiated I am going to explain what Xero does and why it has such potential.




--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
Mags
post Posted: Jul 31 2018, 09:05 AM
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In Reply To: nipper's post @ Jul 30 2018, 08:55 AM

I didn't know USA small business didn't use accountants/packages as much. No surprise there I guess given that the ATO seems to have been able to seek revenue from every possible crack in the economy.

No surprise there's been a change at the top. I thought early on it looked to be a pump and dump stock: founders/directors earning millions while no profits made, but huge loans being drawn...... Now they sell down their holdings.... I've seen this story before.

Then chuck in the new cash grabbing managers, which will simply bleed them of customers:

Xero discussion thread

It's a dangerous game, as xero had an almost cult like status amongst small business and their accountants. Destroy that, and their cost of customer acquisition will raise even higher!

And I suspect I'm not alone in seeing people leaving cloud based stuff and return to desktop, or even locally server hosted stuff. With all the telecommunication/NBN dramas, power issues, etc having your own local copy is a smart move. Never mind the privacy stuff.

I'll give this one a wide berth

 
nipper
post Posted: Jul 30 2018, 08:55 AM
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QUOTE
Bronte Capital's John Hempton, one of the country's most vocal and aggressive short sellers, owns just one ASX-listed company in his fund: Xero. And he says the accounting software group, which has a $5.4 billion market capitalisation, has a shot at being a $100 billion company.

"If any Australian company has the potential to be a $100 billion tech giant, it's Xero," Mr Hempton told The Australian Financial Review. "In order to pull that stunt, they need to succeed in what the global ambition of Xero should be – we are the backbone accounting system all round the world and everyone plugs into us."

Xero is now one of Bronte's largest positions, driven by its share price rise, which is up around 60 per cent this calendar year.

Mr Hempton's ambitions for the group, which earlier this year made the ASX its sole listing after controversially leaving the New Zealand Exchange, are enormous. He said the company was far ahead of many of its competitors by putting accounting software in the cloud but hasn't perhaps been as ambitious as it might have been.

But now Xero is at an inflection point of sorts. In March, founder Rod Drury announced he would step back as chief executive, though would remain as a non-executive director and shareholder. Former Microsoft Australia chief executive Steve Vamos was appointed to the job.

It was a move that surprised the market, with questions being asked about what had triggered Mr Drury's decision. Any number of theories are still being tossed about. The prevailing one is a combination of some investors pushing for a more ambitious global outlook, coupled with Mr Drury reorganising his own priorities.

Mr Hempton said the transition has risks but also great potential. He compares it to when Microsoft founder Bill Gates retired. "The pros and cons are complex and reflective of the Gates-Ballmer transition. It all depends on the relationship between Vamos and Drury," he said.

"If Drury can remain the guru and Vamos runs it, then it will do great. If Drury gets pushed out of the day-to-day, then it could enter the same product stagnation as Steve-era Microsoft."

Mr Hempton isn't the only bullish voice on the stock. Morgan Stanley analysts published a report in June, titled "It's the fast that eat the slow, not the big that eat the small". It argued that while Xero might be on a high enterprise value to sales multiple of 11 times, it had a $31 billion market opportunity to exploit. The analysts are forecasting international accounts will grow from about 32 per cent of revenues to more than 50 per cent by 2025, based on the company knocking competitor Sage from the number one spot in the UK, and the US to improve 36 per cent.

Morgan Stanley says Xero has a major advantage on its competitors – like global giant Intuit and the UK's Sage – because Xero started as a cloud product in 2007 and, unlike the others, doesn't have any legacy desktop products to protect.

Its detractors, while recognising the company is a great software company with a strong position in its core Australian and New Zealand markets, view the outlook differently. They point out Xero hasn't succeeded with its US expansion, bringing into question the whole global roll-out play beyond New Zealand, Australia and the UK. The risk, ultimately, is whether it will struggle to grow offshore. They also say the market's ability to shrug off Mr Drury's decision to pare back his day-to-day involvement is startling, particularly when coupled with other moves.

"There are a few red flags that makes me feel uncomfortable with the nosebleed multiples which have been like water off a duck's back: CEO selling and quitting, CFO selling and quitting, founding director selling, large write-downs of capitalised software, ongoing changes to reporting metrics definition," said one investor who has held the stock in the past but no longer owns it.

As for the US? Supporters say it's a different market. Unlike Australia and New Zealand, small businesses aren't so reliant on accountants, which are the main sellers of the Xero product. One suggestion is this might be because the US doesn't have a value-added tax, like the GST, which requires small businesses to file regular tax statements. It's also a tough market because Intuit will do whatever it takes not to cede share in its home market. It showed how closely it is watching Xero when it aggressively entered the Australian market with its Quickbooks product.

Xero is actively chasing other markets, and many of them do use accountants and bookkeepers more than the US. But is that enough?

"I see no reason Xero will have any more success in Canada, South Africa, Asia, Germany and every other country they're targeting, because they are spread thin spending less money in each market and have Intuit and Sage throwing rocks from the sidelines wherever they go," said the sceptical fund manager, adding competitors have caught up and rolling out similar offerings.

Others say that misses the point. Xero is constantly improving technology: consider its decision to switch from the Microsoft cloud to Amazon cloud aimed at using more artificial intelligence which would catapult it into another league again.

Xero's track record ensures the market will give it time to deliver on its global ambitions. Though with so many competitors breathing down their necks, taking their time isn't the best strategy.

Bronte Capital's Mr Hempton said Xero, backed by the market, is being too conservative. "Their ambition is to grow as fast as they can subject to not running out of cash. Why is it subject to not running out of cash? "A Silicon Valley company with a global ambition would hype and raise."
https://www.afr.com/technology/bulls--bears...20180725-h134m6



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: Mags  
 
blacksheep
post Posted: Nov 16 2017, 09:51 PM
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In Reply To: nipper's post @ Nov 9 2017, 11:10 AM

Xero CEO Rod Drury selling $85m stake, Credit Suisse on board - shares were being offered at $28.45 each. The stock closed at $29.88

Read more: http://www.afr.com/street-talk#ixzz4yavPJBDm
https://www.shortman.com.au/stock?q=xro
Attached File  xro.png ( 86.44K ) Number of downloads: 4




--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 


nipper
post Posted: Nov 9 2017, 11:10 AM
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QUOTE
The founder of cloud accounting software provider Xero, Rod Drury, expects the business to become the newest member of the ASX200 index once it delists for the New Zealand Stock Exchange and consolidates on the Australian Stock Exchange from January 31, 2018.

Xero shocked its long-time New Zealand investors with the move, its stock falling 4.3 per cent to $NZ32.60 in early trade on the NZX, despite the company also revealing its first-ever positive earnings result.

Read more: http://www.afr.com/business/xero-to-join-a...h#ixzz4xtOSYMbk




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
marketwinner
post Posted: Jan 4 2014, 02:04 PM
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In Reply To: ShareScene.com's post @ Feb 3 2009, 10:00 AM

XERO is one of the star performers in the global stock markets. Recently when my daughter did research on this company for her accountancy subject in School it was trading around NZD 18 and she said it has a potential. I should have listened to her and should have parked all my money there. It went up immediately after my daughter’s comment and traded around NZD 35.

In global markets analysts and other market players will follow current popular stocks, index and other stocks while neglecting some out of favour stocks with more than ten bagger characteristics. These are life time opportunities and only few can identify these types of hidden gems before others. Even now if we can do some home work we should be able to indentify more than ten bagger stocks from all types of markets such as developed, emerging and frontier markets .I have seen these types of stocks in few stock markets. I like to follow these types of stocks. So we can forget market volatility, charts and other factors while having good sleep.

Remember 10 years back above stock was trading around NZD 1 and it has become more than 30 baggers now. If we want to outperform market, index and all other instruments at least we should have one more than 20 baggers in our basket. Even now there may be stocks with more than 30 baggers characteristics in global markets.
Investing in correct stocks could lead to making fortune. Have a great 2014.

When stocks make new high they can go up further. Similarly when stocks make new low they can go down further.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


 
ShareScene.com
post Posted: Feb 3 2009, 10:00 AM
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Company:
XERO LIVE LIMITED

Code:
XRO

Website
http://www.xero.com/


 
Lizard
post Posted: Feb 8 2008, 09:52 AM
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Some market interest in XRO of late - pushed back off its lows. Though liquidity only suits small players. It only made it on my watchlist and not into my portfolio.

Similar sized post-IPO fall-off in s.p. to that which 42 Below showed after listing and before getting traction (they seem a good comparison - potentially good businesses, listed at a somewhat cheeky price).

 
 



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