Xero (ASX:XRO) has further upside potential after reporting "strong" results for the first half of fiscal 2025 and issuing "conservative" operating expense ratio guidance for the fiscal year, Jarden Research said in a Friday note.

The software-as-a-service company reported earnings of NZ$0.62 per share for the six months ended Sept. 30, up from NZ$0.35 per share a year earlier. Operating revenue rose 25% to NZ$995.9 million from NZ$799.5.

The investment firm had expected Xero's operating expense ratio for the first half to be about 76%. However, the company "surprised" the investment and advisory group with a lower ratio of a little over 71%.

Xero expects its operating expense ratio to be around 73% in fiscal 2025.

"It appears conservative in our view; we believe that Xero's strong revenue momentum would result in a lower ratio. We assume 72% in 2025. We therefore upgrade our 2025 underlying Earnings Per Share estimate by 3%," the investment and advisory group said.

Jarden Research raised its price target for Xero to AU$177 from AU$151 and maintained its overweight rating.

Xero's shares closed up almost 1% at market close Friday.

Price (AUD): $172.61, Change: $+1.61, Percent Change: +0.94%