Xero hits record high on hopes of boost from pro-business Trump

Shares in New Zealand tech superstar Xero have soared to a record high, optimistic it may benefit from a pro-business Donald Trump government in the US.
The cloud-based accounting software company’s shares closed at A$161.14 on Australia’s ASX market on Tuesday, valuing the firm at A$24.37 billion.
Xero is benefiting from optimism about the US economy after the election of Trump. Although the company has established strong footholds in New Zealand, Australia and the UK, it has long held ambitions about cracking the much larger US market where it is up against rival Intuit.
“The post-Trump, post-Republican government is seen as being supportive for small-to-medium sized enterprises, which of course is the market that Xero aims at with its products and services so there is a bit of excitement there,” said Harbour Asset Management portfolio manager Shane Solly.
Xero is due to report its first-half result for the six months to the end of September on the ASX on Thursday. Though its headquarters are in Wellington, the company is no longer listed in New Zealand, having dropped its NZX listing in favour of Australia’s bigger capital market in 2018.
Solly said there was a lot of anticipation about what new chief executive Sukhinder Singh Cassidy has done since taking over the role in February last year.
The management team had gone through a lot of transition, with some high-powered hirings which had pushed up costs, and investors wanted to be rewarded for that, he said.
Singh Cassidy is an experienced Silicon Valley executive with more than 25 years’ global leadership experience and was appointed to lead Xero through its next phase of growth.
Under her leadership, Xero has pushed through a range of price increases.
That hasn’t made it popular with customers – with Reddit threads from “furious” and “angry” subscribers calling it “greedy”, “a shitty move” and an “absolute rort”, and Trustpilot reviews also railing against the “very expensive”, “outrageous” and “unreasonable” hikes.
Still, the changes are likely to have helped put more cash in the company’s coffers which it can use for growth.
And it appears the disgruntled customers may have stuck with Xero regardless.
“Whilst that’s seen a little bit of pushback from some customers, when they’ve gone out and looked at the bundle of services they’ve found that actually it hasn’t seen people churning off to a degree that people thought,” said Solly.
Investors will be looking to see how much of that money is used to drive growth in the US, as the company appeared to be channelling more of its resources to that market.
“That is what investors are really going to be focusing on at this result – what is it going to cost? How do you do it? What’s the returns?” said Solly.
“The US is a huge market, a technology market, it is also very competitive. Intuit is the strongest competitor in that market, but there’s a bunch of others as well. 
“It’s a difficult market to break into but I think if they do get traction there, then certainly that may be quite supportive. We need to see some evidence to make sure that they actually can do that.”
Harbour was a long-term investor in Xero and had been quietly adding to its holding over the last six months.
“We’ve been pretty happy to remain invested in the company,” Solly said.