Brean Slaps Buy Rating On Intuit; Business Driven By QuickBooks

Brean Capital’s Yun Kim believes that there are “several incremental revenue and margin drivers” that could act as key catalysts for Intuit Inc. INTU.

Kim initiated coverage of the company with a Buy rating and price target of $125.

QuickBooks Drives Upside

“We believe INTU shares are more driven by growth opportunity in its QuickBooks-driven small business segment and less by its TurboTax-driven consumer tax business, which has stabilized into a high-single-digit revenue growth business with low 60 percent margin business,” Kim mentioned.

The analyst believes that the company would be able to meet the current revenue and margin expectations without any improvement in the attach rate of the new QuickBooks Online (QBO).

Stock Catalysts

Kim also pointed out that any upside to the attach rates, sustained resiliency of QuickBooks Desktop and pricing leverage could lead to revenue and earnings upside, as well as steady margin improvement.

In addition, the analyst believes that there is minimal risk to Intuit achieving its over two million subscriber target for QBO in FY17.

“We expect investors to focus on quality of QBO sub adds going forward and less on the actual QBO sub adds,” Kim noted.

The analyst stated that the operating margins of the small business group segment would be a key metric in assessing the quality of QBO’s subscriber going forward and whether Intuit is achieving profitable growth.