Hundy soon?, page-17

Courtesy of the Fin Review;

RBC Capital Markets says Xero's subscriber numbers are faring better than its previous estimates, noting that mobile app download data has improved over recent months. Unique app downloads are up 3 per cent in the year-to-date.

RBC has lifted its subscriber forecasts by 1 per cent for both the first half of the 2021 financial year and the entire 2021 financial year.

The prospect of an economic recovery could create more small and mid-sized businesses, as in the last recession, and that provides a "solid backdrop" for strong subscriber growth in the 2022 financial year.

The broker's estimates for average revenue per user (ARPU) remain broadly flat for the 2021 financial year given Xero has started to discount, though only at the entry level. It rivals are discounting across all price points.

While another UK lockdown would be a short term headwind given it accounts for 20 per cent of sales.

Xero is viewed as being far better positioned to win market share from rival Sage based on the broker's feedback and Google Trends search data.

RBC Capital Markets raised its estimates for earnings before interest, tax, depreciation and amortisation (EBITDA) by 4 per cent and 3 per cent respectively for the 2021 and 2022 financial years.

Xero's price target was lifted to $120 a share from $92 a share.