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Current as of 28/11/14 01:20PM NZST

Hamish Fletcher

Business reporter for the NZ Herald

Xero caught in market dive

Share price slide part of global tech sell-off but CEO confident investors will return to sector.

Rod Drury. Photo / APN
Rod Drury. Photo / APN

Xero chief executive Rod Drury is "extremely confident" the market will return to technology stocks as slumping United States sentiment helped pull the accounting software maker's share price down to a four-month low.

Xero shares fell as low as $29.50 yesterday - their lowest point since December - eventually closing down 11.52 per cent at $31.50.

Investors have hammered technology companies on United States markets in the past few days and dumped tech and biotech stocks.

The Nasdaq dropped 2.6 per cent on Saturday, its biggest one-day drop since February, and fell another 1.16 per cent yesterday to 4079.75.

Drury said yesterday that the business was "relatively isolated" from these adjustments because of the $210 million it had in the bank.

Xero's share price had soared since it raised $180 million last year to fund United States growth and Drury said part of the strategy when raising those funds was to make sure the company had plenty of cash "in case the market conditions changed".

Drury was "extremely confident" investors would return to tech-nology stocks shortly "because it is going to be high growth for the next five to 10 years".

But Forsyth Barr analyst Blair Galpin said there could be some time before people starting jumping back on to tech stocks.

"If it was a blip it would be down for a few days and back up to the same levels again in a week's time. I don't think we're likely to see that, given it's been such a sharp drop off over the last few days," Galpin said.

Another Forsyth Barr analyst Andrew Harvey-Green said the drop in Xero's share price was predominantly driven by falling sentiment in overseas markets rather than a reaction to the company's full-year financial result.

Harvey-Green said two cloud-based companies comparable with Xero - Netsuite and Workday - had fallen around 33 per cent over the past six weeks.

"Xero's just copying that now, I think it's down around 30 per cent from its peak."

Woodward Partners director Nick Lewis said the global tech sell-off was playing a part in Xero's share price tumble.

He said Xero's fall also reflected sentiments from local analysts that it was at a "very full price" and possibly needed to come back in line as well.

"So you've seen a substantial sell-off for those two reasons."

- additional reporting AP

- NZ Herald

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