Motley Fool Money Stock of the Week: Xero (ASX: XRO), February 2, 2022
Feb 2, 2022
Ryan Newman, Motley Fool analyst covering tech and software, talks Xero and discloses he owns shares. He explains Xero’s cloud accounting roots and why accountants fueled adoption. He covers subscriber mix across regions, SaaS monetization and ARPU growth. He outlines the main risks like US expansion and competition, then gives a concise buy case.
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Xero Was Born To Replace Disk Based Accounting
- Xero built a cloud-native accounting platform to replace cumbersome disk-based software with always-on web and mobile access.
- Founder Rod Drury created it from frustration with legacy software, enabling subscription revenue and easier updates across devices.
Accountants Drove Xero Adoption
- Accountants and bookkeepers became Xero's de facto salesforce by preferring its interface over QuickBooks and MYOB.
- Ryan Newman notes some accountants even charge clients more to use other software, accelerating Xero adoption.
Accountant Preference Often Dictates Software Choice
- Scott Phillips recounts how an accountant chose MYOB for his wife's business, showing accountants' choice often determines software used.
- He argues Xero's enlistment of accountants likely multiplied its size by ensuring accountants pushed it to clients.