** Morningstar says expansion of subscriber base in U.S. is driving up customer acquisition costs for Australian accounting software maker Xero XRO.AX
** Brokerage says co's North America subscriber base grew to 422,000 by fiscal 2024 end after nearly a decade in U.S.
** Adds that this compares to about 40 million small and medium businesses in U.S. and Canada, implying Xero's market share of 1%
** Morningstar highlights private player Intuit's QuickBooks has around 6 million subscribers in same geography, equating to about 15% market share
** "We agree the market opportunity in the U.S. is attractive...but we don't expect Xero will be able to capture this opportunity in a profitable manner," Morningstar says
** Investment research firm, however, marginally raises fair value estimate by 2% to A$92
** Stock down 5.3% YTD as of last close, outperforming 12.9% fall on ASX Technology index .AXIJ
(Reporting by Nikita Maria Jino in Bengaluru)
((Nikita.Jino@thomsonreuters.com;))
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