Size of Xero's Share Buyback Surprises Jefferies

Dow Jones11-13 06:18

2218 ET - The size of Xero's A$1 billion share buyback surprises Jefferies. It expects Xero to generate adjusted Ebitda of between NZ$900 million and NZ$1.2 billion in FY27-28. Jefferies anticipates annual capex of some NZ$500 million-NZ$600 million, which is partially offset by share-based compensation of around NZ$250 million. On that math, Xero will have NZ$750 million-NZ850 million of free cash flow, which falls short of the planned buyback. "We understand that the board believes the stock is undervalued and that gearing remains low, but we argue that Xero should keep some cash for a rainy day, particularly given the ongoing risk of AI disruption in software as a service," analyst Roger Samuel says. Jefferies retains a hold call on Xero, which ended Thursday at A$75.17.

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