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The Bull And Bear Cases For Intuit After A Q3 Beat

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The Bull And Bear Cases For Intuit After A Q3 Beat

Wall Street was mixed on Intuit Inc. (NASDAQ: INTU) following the company’s third-quarter print Tuesday, with analysts reaffirming bullish, bearish and neutral views.

The Analysts 

On the bull side, Credit Suisse analyst Brad Zelnick reiterated an Outperform rating on Intuit and raised the price target from $195 to $215.

Representing the bears, Morgan Stanley’s Keith Weiss maintained an Underweight rating and raised the price target from $147 to $154.

Four other analysts issued updates on Intuit on Wednesday. Get our full coverage in real-time by signing up for Benzinga Pro and searching ticker “INTU.”

The Bull: ‘Stronger For Longer'

Credit Suisse highlighted the success of TurboTax Live and QuickBooks Online as key growth drivers both in the past quarter and moving forward.

In an effort to cut into the assisted tax category, the TurboTax Live platform was launched in November 2017 to connect users with live tax professionals. The platform helped drive average revenue per return and validates Intuit’s participation in a $20-billion segment, Zelnick said. 

QuickBooks Online’s subscriber growth of approximately 3.2 million surpassed the analyst’s estimate by more than 100,000. Self-employed tax filers were noted as a significant driver of the growth. 

The analyst said he expects double-digit subscriber growth to continue, although fourth-quarter implies deceleration as the company experiments with pricing and promotions.

The Bear: Margin Pressure ‘Keeps Us Sidelined’

Morgan Stanley touched on many of the same positives from the earnings report, conceding that the strong numbers bode well for the company.

Intuit’s 14-percent annual growth in the consumer tax business so far this year outpaces both Intuit and its investors' expectations, Weiss said. 

Yet the analyst noted flattening net add growth for Quickbooks Online as a point to watch. The company’s 40-percent annual subscriber growth in the U.S. falls short of its 46-percent growth annually in Q2 and 53-percent growth in fiscal 2017, Weiss said. 

Intuit did beat consensus revenue expectations, but operating margins declined 120 basis points year-over-year, and fresh guidance for a yearly decline of 50 basis points constrained the translation to higher EPS targets, the analyst said. 

Morgan Stanley sees Intuit shares as trading at a premium, making other names like Microsoft Corporation (NASDAQ: MSFT) or VMware, Inc. (NYSE: VMW) more attractive.

Price Action

Intuit shares were trading up 2.34 percent at $195 midday Wednesday.

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Latest Ratings for INTU

DateFirmActionFromTo
Nov 2020Credit SuisseMaintainsOutperform
Nov 2020Morgan StanleyMaintainsOverweight
Nov 2020Piper SandlerMaintainsOverweight

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