Morgan Stanley Sees Intuit Tailwinds Not Carrying Forward Strongly Into 2017

Morgan Stanley maintains its Equal-Weight rating on Intuit Inc. (NASDAQ: INTU), saying that the tailwinds of exceptional consumer tax performance and a surprising rebound in desktop are unlikely to carry forward to the same degree in FY17, resulting in guidance that failed to move estimates higher.

Intuit ended the fourth quarter with 1.513 million QBO subscribers, up 41 percent and 13,000 above the high end of guidance. This compares to a 17,000 beat in the third quarter, and a range of 17,000–50,000 over the last several quarters.

However, the strong end to the year did not carry forward to FY17 guidance, which was in line with expectations with respect to QBO subscribers (2 million–2.2 million, 32–35 percent year-over-year), revenue ($5 billion–5.1 billion,+7–9 percent year-over-year) and EPS ($4.30–$4.40, +14–16 percent year-over-year).

"While guidance may incorporate some degree of conservatism, we don't see significant upside to guidance given: 1) lower magnitude of QBO subscriber outperformance, 2) a difficult comparison in Consumer, 3) a higher mix of lower margin Small Business revenue, and 4) smaller benefits from the desktop revenue deferral," analyst Keith Weiss wrote in a note.

"We maintain our EW as we struggle to find catalysts likely to drive consensus EPS materially higher than current levels," Weiss added.

The analyst has a price target of $105, while shares were seen down 3.71 percent at time of writing, trading at $109.61.

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