The Xero Limited (ASX:XRO) share price has jumped $1.42 or 3.7 per cent higher to $39.63 after UBS upgraded the stock to a neutral recommendation and increased its share price target to $42.50.
According to a report in the AFR, UBS are saying Xero is in a position to finally transition from a loss-making start-up to a self-funding business with significant growth opportunities.
The broker has pointed to regulatory changes in the United Kingdom in FY 2019 as being a potential industry-changing event and a great opportunity for Xero.
UBS said that within five years, the Xero share price could be worth more than $100, if not more, if new international markets or revenue streams are included.
That said, this is not a stock for the faint hearted, with the broker saying numerous key risks could result in a downside scenario valuation of $16, according to the AFR report.
With today’s move in the Xero share price, the stock is trading at yet another 52-week high. Over the past 12 months, the Xero share price has doubled, far outweighing the modest 1.7 per cent gain in the benchmark S&P/ASX 200 Index.
The Xero share price is now within shouting distance of its March 2014 all time high share price of $42.96.
In its most recent half year results, Xero Limited reported operating revenue had increased 37%. Xero Limited reported it had added 337,000 net subscribers in the past 12 months to finish on 1.2 million subscribers as at 30th September 2017.
In March, Xero shocked the market by announcing CEO and founder Rod Drury was stepping down, but clearly the market has now taken that news in its stride.
XRO Price at posting:
$39.50 Sentiment: Hold Disclosure: Held
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