Intuit Inc. (INTU)

Report a couple of weeks ago was miserable. Great runway to analysts' price target. Enticing, but just not the place to be. If you believe in the investment story, instead of buying at market price, he'd sell some puts with a strike price where you really, really want to own it.

Hit by the software sell-off. Are important to small/medium-sized businesses. They will use AI to improve their products, in fact. Is trading at a 20-year low in terms of PE, which doesn't make sense. It looks good here. Software as a whole is a ripe, attractive area, but doesn't know if software will recover in a few months or several or a few years.

It's been a brutal year for software companies. INTU is -50% from last summer's high, but their customers are sticky (consumers, small/medium) businesses, which immunizes them from AI displacement worries. Businesses can't afford to use AI to write their own software. INTU reported a top and bottom line beat and raised full-year guidance. Also, they will lay off 17% of its staff to lower costs, which the street viewed this as weakness, not strength. He totally disagrees with the sellers. 

Is -35% in Q1 and one of the worst performers on the S&P. The street expects AI to displace software names, but he disagrees. Small business trust the Intuit brand, and Intuit has a network of experts to help customers. Shares have been recovering a bit lately.

He bought it. How much lower can these software names go? Intuit is adopting AI to make them more efficiency such as Turbo Tax and QuickBooks. Small businesses use their software for years and years and likely won't leave it. He bought it at $400 and it's already up 10%.

Poster child for companies beaten down on AI fears. Provides financial infrastructure for small-medium businesses. Cheap at 15-16x forward PE. Grows consistently 10-15% on top and bottom lines.

Fair concern about AI impacting TurboTax, yet even free tax filing hasn't taken a bite out of Turbo's business. Will develop its own AI tools to embed in products. Yield is 1.04%.

Is -33% this year. Earnings growth expected at 19% this year. A great growth stock. Their business is mostly geared to consumers, so the AI threat is minimal. This has been thrown out with the bath water.

 It reports Thursday. They just unveiled a new tax software that he likes. Plus, the IRS is phasing out their own software, so there's less competition.

For Q4, INTU reported revenues of $3.8 bln vs $3.75 expected and EPS of $2.75 vs $2.66 expected. The main concern with the quarter appears to be a bit more of a conservative guidance being provided by management but this likely makes sense as they start the year, to give them some wiggle room depending on how the economic environment unfolds. They continue to repurchase shares as well. We don't see much in here that should really change ones view on the company longer-term.
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If this does well, it will be in this Q1, because of tax return season, their seasonality. He targets $705. Buy some now, more at $585, then $550 at support.

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.

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 beat top and bottom lines, but missed guidance so it's been down. Likes it.

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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