Investing.com - Despite transitioning into profitability, Xero Ltd (ASX:XRO), a tech stock listed on the S&P/ASX 200, has seen its share price fall. The shares, which closed yesterday at $14.72, have dropped by 5.2% during Thursday's trading, now exchanging hands for $108.74. This drop is notable given that the ASX 200 is up by 0.3% at the same time.
The decrease in share price follows the release of the business and accounting software provider's half-year results for the six months ending 30 September (H1 FY2024). Despite robust results, ASX 200 investors are selling off Xero shares. Expectations for the tech stock had been high, given its soaring share price gains over the past year and new CEO Sukhinder Singh Cassidy's commitment to profitability rather than pursuing growth at any cost.
Despite a 21% year-on-year increase in operating revenue (20% in constant currency) to NZ$800 million, Xero's share price is on the decline. Earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $206 million, up 90% from H1 FY2023.
The company also reported a shift into profitability during the half-year. Net profit after tax (NPAT) was reported at $54 million, a significant improvement from a net loss of $16 million in H1 FY2023.
Free cash flow saw a year-on-year increase to $107 million, with a free cash flow margin of 13.3%. Correspondingly, the company reported a substantial increase in subscribers, with a total of 3.95 million as of 30 September, marking a 13% year-on-year increase. This surge in subscribers helped drive a 19% boost (22% in constant currency) in annualized monthly recurring revenue to $1.8 billion.
Despite these strong results, the Xero share price has failed to rise. CEO Sukhinder Singh Cassidy reaffirmed the company's commitment to becoming a higher-performing SaaS company, balancing growth and profitability while delivering more value to customers.
As the company looks ahead, it plans to reinvest in its strategic priorities and targets an operating expense-to-operating revenue ratio of around 75% in FY 2024. This is a decrease from the current ratio of 79.1% in H1 FY2024 and 83.9% in H1 FY2023.
Despite today's significant drop, Xero's share price has still seen a healthy increase of 55% in 2023.