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In a report published Friday, Morgan Stanley Upgraded H&R Block
HRB to Equal-Weight and raised its PT from $17 to $23.
Morgan Stanley reported that, “We assume HRB
grows assisted volumes 4.4%, driven by market growth 1%
above IRS forecasts (IRS officials have told us its latest
forecasts include upside from the Affordable Care Act, but IRS
has not been perfect at forecasting in the past) and HRB's
assisted business takes market share because of the added
complexity / HRB's smart marketing. We do not include pricing
upside from the ACA – we believe it's still unclear if the IRS
will require another form, with HRB management on
Thursday's call noting that Massachusetts is not a good proxy
for the rest of the country. In addition, the assisted tax prep
industry remains very competitive (as the dominant player,
HRB still only has 18% market share, the 2nd largest company
has only 3% share). If there is a permanent increase in the
number of filers, given high retention and referral rates, we
would expect companies would be aggressive on price to
secure these customers long-term.
Shares of H&R Block closed at $24.98 on Thursday.
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