Xero became a $2 billion company on Thursday and its shares passed the $18 mark in trading yesterday. It seems there is no limit to what the company can achieve.
All of this has happened without Xero making a profit. Mr Timms said the company was putting much of its cash back into research and development and marketing. Mr Drury was a strong leader and commanded attention in the market.
''Xero has a strong following in New Zealand's small businesses. Accountants are using the software and are recommending Xero to their clients. A Dunedin firm is a big pusher of Xero software.''
The software had found favour with those who had used other products in the past that were less user friendly or required the regular downloading of updates, he said.
Xero's margins continued to improve as revenue growth more than outstripped the cost of adding incremental users on the platform. Over time, as Xero's customer base and revenue continued to grow, margins should improve substantially.
''At these levels, the share price is pricing in not only continued success in New Zealand and Australia but also considerable growth in the United Kingdom and the United States. We believe that Xero has a lot of potential in those markets,'' Mr Timms said.
Mr Drury said the Kiwi accounting software provider was ''just getting started'' and would begin a major push into the United States later in the year.
''It still feels like early days,'' he told The New Zealand Herald.
''We've got a wall of innovation in the pipeline.''
But he admitted that Wellington-based Xero's soaring share price meant the business, which had yet to turn a profit, faced increasingly high expectations from investors.
''We're feeling very excited, but with valuations like this there's a lot of expectation and that just means we have to keep working harder and keep executing,'' Mr Drury, whose 18.5% stake in Xero is now worth more than $378 million, said.
''This is a once-in-a-lifetime opportunity to build a real significant company from New Zealand and so far it's playing out as we hoped.''
Xero, which posted revenue of $39 million and a net loss of $14.4 million in the year to March, now had almost twice the market capitalisation of New Zealand logistics giant Mainfreight, which posted a $65.75 million adjusted profit in its last full financial year.
Its valuation was approaching that of Sky Network TV and had already surpassed online auction website Trade Me, which reported a profit of $75.5 million in the year to June 2012.
Milford Asset Management executive director Brian Gaynor said Xero could, within the next few years, become New Zealand's biggest company in terms of market capitalisation. That title was now held by Fletcher Building, which was worth $5.8 billion yesterday.
Xero's share price had risen about 130% this year, making it the top-performing NZX stock, on the back of expectations that the company would one day turn its customer growth into profit.
It was only four months since the firm's market capitalisation hit $1 billion.
Mr Timms said Craigs estimated the US online account market could potentially be 40 times the size of New Zealand's and more than six times the size of Australia's market.
In the next decade, the adoption of cloud-based technology was expected to continue to rise, which would help promote the adoption of cloud accounting.
''Based on its early success and the overall size of the market, we believe that Xero has a good chance of capturing a share of the US market. We believe the US market is large enough to sustain multiple cloud accounting companies.''
Even a toehold in that market would make the US Xero's biggest market, he said. However, a rich share price implied high expectations and raised the company's risk profile.
