Xero (ASX: XRO) Shares Plummet After Releasing FY21 Results
- Xero shares have opened 11 per cent lower today.
- Despite the strong report, the results did not meet investor expectations.
- A poor session in the US has hit the Australian tech sector-wide.
Xero (ASX: XRO) Shares have today plummeted after releasing their full year's results ending the 31st of March 2021. Combined with all major US indexes falling over 2 per cent, shares in the company have opened 11 per cent lower today. Despite recording operating revenues increasing by 18 per cent for the full financial year, Xero and other highly inflated tech stock continue to disappoint the wider market.
Xero is a New Zealand based technology company that provides accounting software for small and medium-sized companies internationally. Listed on the ASX, Xero has provided their cloud-based technology to over 2.7 million users allowing them to access their software and data anywhere and anytime. This year, Xero made its largest acquisition ever, forking out $261 million for European employee scheduling company Planday. Planday allows business to manage labour costs better and contributes to Xero's wide ecosystem of business-facing services.
Throughout the company's full financial year, the company saw total subscribers increase 20 per cent to 2.74 million. The headline figure was a 16.4 million increase in net profits to $19.8 million. Chief Executive Officer Steve Vamos expects "small business to be a major driver of economic recovery in a post-pandemic world," small business that needs accounting software to operate. These small businesses make up over 90 per cent of Xero's operating markets and are no doubt essential in job creation.
As of the 13th of May 2021, Xero shares opened trading at $120 per share, slightly below both the 200 day Simple and Exponential moving average. The company's stock has fallen 23 per cent with its all-time highs, with their most recent results dampening expectations. The current share price is finding support loosely around the 61.8 per cent retracement taken from early March to early April.
Moving forward, the company also provided outlook for the next financial year expecting continued growth for its platform and subscribed base. They believe total operating expenses will remain within a range of 80-85 per cent of operating revenues, which is consistent with current levels. The company's recent acquisition of Planday is also expected to add 3 per cent to FY22 revenues.
Broader Equity flows continually pose a threat to Xero, which currently trades at a price to earnings ratio of over 500. The Tech heavy Nasdaq fell 2.67 per cent overnight, setting a negative lead for the Australian market. Musing of rising inflation is threatening growth stocks internationally, with recent Consumer price Index Data beating expectations. Another ASX market darling, Afterpay Touch (ASX: APT), has open trading over 4 per cent lower today also, having tumbled 47 per cent from all-time highs at $160 per share.