Tax Season Starts This Month: TurboTax's Market Share Push

Revenue Drivers

Analyst Yum Kim highlighted four revenue drivers behind the company's consumer tax business and recent trends. They are:

• Tax return unit growth, (one times revenue growth multiplier).
• Software category growth (three times revenue growth multiplier).
• Intuit's share within the software category (1.5 times revenue growth multiplier).
• Revenue per return (one times revenue growth multiplier).

With TurboTax franchise having a 65 percent share in the software category, Brean Capital said software category share growth is the biggest revenue growth driver.

Pricing To Decline Modestly

The firm expects pricing, defined as revenue per return, to decline modestly yet again this year. This, according to the analyst, is consistent with the company's strategy of more aggressively pursuing taxpayers looking for lower prices SKUs now but higher priced SKUs in later years.

Brean Capital noted that the company's 6–8 percent revenue growth guidance for this year's tax season reflects the pricing headwind compared to its long-term guidance of 5–10 percent. The firm noted that last year 10 percent revenue growth came on the back of unexpected market share gains, leading to 5 percent growth compared to its long-term growth guidance of 1–2 percent. Accordingly, the firm sees the market share gain within the software category to be the biggest variable in its tax business this year. The firm expects the other three drivers to stay consistent with last year's trend.

Brean Capital remains comfortable with the company's 6–8 percent revenue growth guidance for its consumer tax business. The firm maintains its Buy rating and $135 price target on the shares of the company.