Xero's share price has continued to fall and shed more than 4 per cent yesterday as buying interest dropped away amid a market slump in the United States.
This came on the back of a 4.8 per cent drop in Xero's share price on Monday, then the lowest point in the past three weeks.
The accounting software maker's shares closed yesterday at $37.80, down $1.71. The stock is still up 438 per cent from this time last year.
One analyst, who did not want to be named, pointed towards the "risk sell-off" in US markets when asked yesterday what was feeding Xero's fall.
Benchmark indexes in the US saw their biggest declines since June this week as manufacturing slowed more than had previously been estimated.
Craigs Investment Partners head dealer Byron Burke said it was not the case that more investors were selling Xero shares but rather that normal buying activity had slipped off.
"I wouldn't go as far as to say people are trying to get out of it. It's more the case that the normal activity in Xero is taking place on the sell side that has been there most days [and] with the overseas forces being so weak the normal buy side has been missing ... until [the price] comes down to a level where people think 'this is too cheap' - and who knows where that is - it's not going to attract a lot of new buying interest," Burke said.
Xero last Friday issued a quarterly update and announced sales of $18 million for the last three months of 2013. This was up 14 per cent from the September quarter.
Cash outflow was $13.8 million in the quarter ending December 31, up from $13.1 million during the September quarter.
This 5.3 per cent increase was the slowest rate of cash burn since the company began making quarterly reports in 2012.
Forsyth Barr senior equity analyst Andrew Harvey-Green said on Monday that the lift in cash burn was less than was anticipated.
Forsyth Barr has a 12-month target price for Xero of $24.75 and said the stock was a "risky investment proposition".
$37.80 Xero closing price yesterday
$24.75 Forsyth Barr 12-month target price
- Additional reporting BusinessDesk