Intuit Inc. (INTU)

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.

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).

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.
Unlock Premium - Try 5i Free

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%.

Total online payments are up 20%.

The CEO is doing a great job, but the stock is 5-8% ahead of itself. Also, he expects the market to take capital gains in January, so wait till then before buying when you see the true colours of stocks.

A play on small business which baosted 50% EPS growth in the last quarter.

QuickBooks is the major driver of growth. Management reiterated growth around a strong mid-teens. It reports next week.

They started using AI 5 years ago, and have now introduced Intuit Assist, an AI tool for customers.

Companies like this need new businesses (to become clients), but if were heading into a recession there are fewer businesses. So, this is a challenge for INTU. Over 5 years, maybe this is okay, but their PE is now at a high 40x. If want to buy, buy a small position.

She just bought Intuit. PE isn't cheap, but it has a competitive advantage because they operate in tax and accounting, areas which are more resilient in a recession if enterprise spending slows. Also, they offer better margins in their online where most of their revenues lie.

A great, long-term company, great because it is invaluable to small businesses. The chart shows a head-and-shoulders pattern.

He uses the products as do many others. It has been an amazing company with a strong main business. However it has diversified away from its main business and this does not necessarily work with any company. He hasn't researched it yet but it should be in a group of 60 to 100 quality businesses that will do well.