Kim Bolton Intuit Inc. INTU-Q PAST TOP PICK Mar 26, 2025

Markets are lofty, if not exactly frothy, right now. Trading around $630, 12-month target of $717. February reporting beat on top and bottom, raised guidance. We're going into tax season, and this is where the company really makes their hay. Yield is 0.6%.

EPS of $9.88 compares to estimates $9.38; sales of $6.73B beat estimates of $6.64B. Intuit exceeded fiscal 3Q consensus due to 18% revenue growth in its Small Business and Self-Employed (SBSE) segment, with Online Services a driver -- up 19% on payroll, payments and Mailchimp. QuickBooks online accounting was solid (up 19%), fueled by higher prices, customer growth and a shift in product mix. The company raised its fiscal 2024 sales-growth guidance to 13% vs. 11-12%, but Consumer Group (TurboTax) guidance was maintained at 7-8%, with its AI initiatives for the Assisted Tax and Business segments in the early stages. A decline in the low-end tax-filer segment was a negative surprise, yielding a 80-bp decline in market share. Credit Karma sales growth (up 8%) pushed against the headwinds from higher interest rates on personal, auto and mortgage loans. There is always going to be competition, government or otherwise, but the company's dominance should help it. Tax of course is not its only business. Consensus still calls for EPS in 2025 to still more than double from 2023 levels. We think it is more of a BUY today.
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Likes it, but shares slid over 2.5% on layoffs news which are AI-related. Enterprise software may be seeing a slowing. Valuations for these stocks is declining and are paling next to hardware stocks (except Microsoft).

They report next week. We need to see revenue grow accelerate (11% last quarter, 23% in last three years). Was downgraded today.

Hesitant because TurboTax is a large part of this company. In some countries, tax software is already embedded in government data. If that were ever to come to NA, huge product risk.

INTU is trading at 35.8x Forward P/E. The business is expected to grow its topline organically by around 12% over the next few years. INTU is a very high-quality business that generates solid, growing cash flow year after year, but the valuation is not cheap. We like the stock and we are okay to average into INTU over time, but we would not be buying too aggressively here. It reported last night: EPS of $1.99 beat estimates of $1.85; revenue of $3.18B beat estimates of $3.08B. Intuit exceeded fiscal 4Q consensus on revenue growth at Credit Karma (up 14%) and its Small Business and Self-Employed (SBSE) segment (up 20%), with Online Services also a driver -- up 19% on payroll, payments and Mailchimp. QuickBooks Online accounting sales were solid (up 17%), fueled by customer additions, higher prices and product mix shift. The company set fiscal 2025 sales-growth guidance of 12-13% vs. 12% consensus, with SBSE at 16-17%, Consumer Group (TurboTax) at 7-8% and Credit Karma at 5-8%. Management stated a long-term sales view for SBSE of 15-20%, emphasizing average revenue per customer gains on an upmarket push. Credit Karma sales growth (up 14%) was a highlight, with auto insurance accounting for 6 percentage points, personal loans for 5, credit card for 2 and CK Money for 1.
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They beat top and bottom lines, but missed guidance so it's been down. Likes it.

INTU has responded to the report, highlighting its strong growth and outlook. The short report attacked INTU's acquisitions and expressed concerned on competition, among other issues. But INTU has a very strong history of growth and performance and a very good growth outlook. We think Spruce is really just focusing on valuation: at 31X INTU is not cheap, but its premium is due to its size, market share, and consistency. We would not see the short report as a reason to really worry here. 
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They do a great job using AI to help customers write their tax returns. Their run isn't done and has a lot more room to run higher.