Jeremy Hutton: Milford Asset Management expert on Xero's rough start to 2026

Accounting software business Xero has started 2026 on a low note, with the share price dropping significantly.

This is in line with other challenges in the technology sector, which have seen noticeable drops.

Milford Asset Management's Jeremy Hutton explained further.

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Episode Transcript

Speaker 1 (00:00):
Jeremy Hutton's with US Milford Asset Management for our market update. Jeremy,
good evening.

Speaker 2 (00:04):
Good evening, Ryan, how are you going very good?

Speaker 1 (00:06):
Thanks? Can we start in the US? SO market's back
open overnight after the public holiday Monday. Bit of a
wobbly over Greenland and Trump.

Speaker 2 (00:15):
Yeah, that's right. The Cell America trade was back on
last night, and the Nasdaq SMP five hundred indexes both
down two percent, and our own z X down over
one percent as well. So, yeah, a bit of a wobbly.
And most importantly that US ten year bond that's broken higher,
and you know that's interest rates going up, which is

(00:36):
never really a good sign for markets, and politicians start
to get nervous too. So maybe even that rate we'll
contain some of President Trump's tendencies at the moment.

Speaker 1 (00:46):
Yeah, right, Let's go to New Zealand and Zero. This
is accounting software business. Of course, everyone knows that sheer
price has been under some pressure, fell under the psychological
one hundred dollars level. What is going on?

Speaker 2 (00:58):
Yeah, Regarded as one of New Zellen's great companies, Zero
is going through a bit of a lean pad of
late this year. Price is almost halved from its one
hundred and ninety three dollars peak in June last year,
So in just six months it's halved, and it started
twenty twenty six pretty poorly as well, down over sixteen percent.
So yeah, painful for ZERO investors generally accustomed to lots

(01:22):
of success, but Zero has been caught up in a
bit of this global software sell down and the sentiments
really struggling. And as effectively, it's these recent AI models
and they're getting very good at producing basic and good
looking software packages that pretty much the touch of a button.
So you know, some market commentators out there, they're even

(01:42):
calling it a potential existential threat to software and SaaS businesses.
So Zero is getting a little bit tied up with that.
We will follow that this year, you know, as the
AI models continue to develop and get a bit smarter,
we'll see what the impact will have on these software businesses.

Speaker 1 (01:58):
He was also they did a big act because psition
out of the US, didn't they last year, and that
hasn't been received well either.

Speaker 2 (02:05):
Yeah, more stock specific issue, but it hasn't helped the sentiment.
They bought this US payments business called Media paid a
princely some of two point five billion US dollars, so
a big chunky amountain and the market's given that feedback
pretty clearly that perhaps they paid a little bit too
much for it. But to be fair, you know, the
US it's always been been a key geography for zero

(02:27):
to expand into, and also payments as a technology or
addition to their product. That's that's been the radar too.
But perhaps they could have done it a little bit
more efficiently. So the market is taking its time to
digest this transaction and figure out if it was a
good deal or not.

Speaker 1 (02:41):
Jeremy, does that mean we should all go out and
buy shares then.

Speaker 2 (02:47):
Well that's a million dollar question, Ryan. But you know,
no doubt that Zera remains a very high quality company.
It's got some great growth runway ahead of it, and
we know it's had a lot of success in New Zealand, Australia,
in the UK. If it cracks the US market in
its core accounting software, or if this payments expansion goes well,
then the share price could perform really really strongly. You know,

(03:09):
sometimes markets get a little bit nervous and these great
opportunities can pop up, but the pressure's really on on
the zero management team to restore some of this confidence
and get and get the share price moving again.

Speaker 1 (03:22):
Appreciate that, Jeremy. Thank you, Jeremy Hutton from Milford. You're
on news Talk Said.

Speaker 2 (03:25):
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