Xero Ltd (ASX: XRO) has experienced a significant downturn in its stock performance, with shares plummeting nearly 50% over the past year. As of today, Xero’s share price has fallen an additional 0.43% to settle at $93.35, marking its lowest point since early May 2023. This decline raises the question for investors: does this dip present a buying opportunity?
Understanding the factors behind Xero’s decline is crucial. The company’s shares have not been affected by a singular issue but rather by a combination of challenges. In February 2025, Xero’s stock was trading around $180 per share. However, a broader sell-off in the technology sector, coupled with strategic concerns, started to impact investor sentiment. A pivotal moment for Xero came with its acquisition of the US-based payments platform, Melio, for a hefty sum of US$2.5 billion. While the deal aimed to penetrate the lucrative US small business market, concerns have arisen regarding the high acquisition cost and the time required to realize returns.
Investors have also begun to question the growth in Xero’s core subscriber numbers and profits, particularly in international markets where competition is fierce and growth prospects are limited.
Technical Analysis and Market Sentiment
From a technical standpoint, Xero’s shares continue to face downward pressure. Most moving averages indicate a bearish trend, with many technical indicators suggesting a strong sell rating. The relative strength index (RSI), a key metric for assessing stock performance, is currently in the mid-20s. This typically signifies that the stock is oversold, although it does not guarantee an immediate rebound.
On a more optimistic note, there appears to be support around the $92 level, where buyers have previously entered the market. Resistance levels are positioned higher, ranging from the mid-$90s to the low-$100s, which could limit any short-term recovery unless buying activity increases.
Analyst Perspectives and Future Outlook
Despite the recent downturn, many market analysts maintain a positive outlook on Xero’s long-term potential. A majority of brokers continue to recommend the stock as a buy, with price targets set significantly above current levels, contingent on improvements in business operations. Analysts suggest that the market may be undervaluing the Melio acquisition, anticipating that Xero’s core accounting business will accelerate as the integration takes shape.
Investors should pay close attention to key upcoming dates, particularly the release of Xero’s full-year results scheduled for May 14, 2026. This report could substantially influence the share price, as stakeholders will closely monitor revenue and subscriber growth, especially in the US market. Additionally, any updates regarding profit and cash flow guidance, along with the performance of the Melio business, will be significant.
In conclusion, Xero shares are currently trading at a substantial discount compared to their recent highs, prompting some long-term investors to view this as a compelling entry point. However, the prevailing technical signals indicate weakness, and analysts differ on the timing of a potential rebound. Those contemplating an investment might consider waiting for indicators of improving business fundamentals or a breakthrough above critical resistance levels to mitigate risk.
