The Xero Ltd (ASX: XRO) share price has had a difficult year.
Shares in the accounting software company are trading around $61.65 on Tuesday, a long way from the levels investors were accustomed to seeing until earlier this year.
But could Xero shares recover enough to reach $100 in 2027? Let's take a look.
Is $100 realistic?
At the current share price, Xero would need to rally approximately 62% to reach $100. That's obviously a substantial increase, particularly over the next 14 months.
However, it's worth remembering that $100 is hardly new territory for Xero.
In fact, from between May 2023 until January 2026, its shares traded almost entirely above that level, apart from a brief dip in November 2023.
Its 52-week high also remains $150.76, demonstrating just how far the Xero share price has fallen.
Of course, previous trading levels don't guarantee that its shares will return to those prices. But I think there are reasons to be optimistic about the company's recovery prospects.
And I'm certainly not alone in seeing the possibility of a return to triple digits. A recent note out of UBS shows that it currently has a buy rating and $106 price target on Xero shares.
That suggests the broker believes there is potential for upside of more than 70% from current levels.
What could drive the recovery?
I suspect Xero's upcoming half-year results, scheduled for 12 November, will have a significant influence on investor confidence.
The company has continued delivering strong growth, finishing FY26 with 4.92 million customers and revenue growth of 31%.
However, investors are increasingly interested in whether Xero can translate its expanding customer base into stronger earnings and cash flow.
I think there are two other areas worth watching closely. The first is artificial intelligence (AI).
There are growing concerns that AI could disrupt traditional software businesses by automating tasks that customers currently pay software providers to perform.
For Xero, I believe there is an opportunity to use AI to make its platform even more valuable to small businesses and their accountants.
If its results demonstrate that customer demand remains strong and its investment in AI is improving its offering, that could help ease some of those concerns.
The second area is the United States. Xero has invested heavily in expanding its presence in this enormous market, including through its acquisition of payments platform Melio.
I believe the acquisition could strengthen Xero's offering by bringing accounting and payments closer together, making its platform more valuable to customers.
However, investors will want evidence that the integration is progressing well and that the US business can deliver the growth management is targeting.
If Xero can provide reassurance on these fronts, I think there is a genuine opportunity for its shares to be re-rated higher.
Would Xero be expensive at $100?
Interestingly, I don't think a $100 share price would necessarily make Xero excessively expensive.
Based on current CommSec consensus earnings per share forecasts, its shares would trade on a price-to-earnings (P/E) ratio of approximately 33 times FY29 earnings at that level.
That is certainly a premium valuation, especially given the risks facing the software sector. However, I believe Xero has a growth opportunity that could last for decades.
The company already has a strong position in Australia and New Zealand, while international expansion and the development of additional services could support substantial earnings growth over time.
If Xero continues increasing its customer base and improving profitability, I think investors could be willing to pay a premium for that potential.
Foolish takeaway
I believe the Xero share price has a realistic chance of reaching $100 in 2027.
The company has an established global business, plenty of opportunities to grow, and a share price that has fallen considerably from previous highs.
Its upcoming results could be an important step towards restoring investor confidence, especially if management demonstrates that its US expansion is progressing well.
And while a 62% recovery is a big ask, I think Xero has the long-term growth prospects to make it possible.
The post Could the Xero share price hit $100 in 2027? appeared first on The Motley Fool Australia.
Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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