Intuit Analysts React To Tax Software Maker's Q2 Beat

Financial and accounting software maker Intuit Inc. INTU reported Thursday with a compelling earnings beat but followed up with a cautious outlook for 2019. The following is a summary of how Street analysts reacted to the print.

The Analyst

• Morningstar's Andrew Lange maintains a one-star (overvalued) rating on Intuit with an unchanged $170 fair value estimate.
• Bank of America Merrill Lynch's Kash Rangan reiterated with a Buy, unchanged $252 price target.
• KeyBanc Capital Markets' Josh Beck maintains at Overweight, price target lifted from $250 to $255.

Morningstar Waits On The Sidelines

Intuit's fiscal second-quarter report was "good" and highlighted by revenue, EPS and operating income beats, Lange said in a Friday note. The company also showed continued momentum in the consumer business as the Total Online Ecosystem recorded continued earnings growth, he said. 

Despite outperforming expectations in the reported quarter, Intuit's guidance remains unchanged, which indicates some seasonality, the analyst said. The fiscal third quarter is the company's most important, but expectations for total revenue in the range of $3.21 billion to $3.26 billion remains unchanged, he said. 

The lack of any upside potential implies the stock is overvalued versus a fair value estimate of $170 per share, Lange said. 

Investors should wait on the sidelines for a larger margin of safety before becoming buyers, in Morningstar's view.  

Related Link: Morgan Stanley Drops Bearish Intuit Stance, Points To Tax Season Catalysts

BofA: 'Across The Board' Strength

Intuit's earnings report was "solid across the board," with multiple beats and encouraging metrics, Rangan said in a Friday note. They include:

• A consumer business that's growing at 11 percent versus guidance of 9-10 percent.
• Small business online revenue growth of 38 percent versus the company's long-term guide of 30 percent.
• Acceleration in small business online services revenue growth from 36 percent last quarter to 39 percent.

In the near-term, the company could outperform expectations on the back of growth in Turbo Tax Live, as tax fundamentals "are strong," the analyst said.

Over the long-term, Intuit's multiple growth drivers include continued Quickbooks Online subscriber additions of more than 1 million per year and continued improvements in Turbo Tax geared toward attracting young tax filers, according to BofA. 

KeyBanc: 'Clean Bill Of Health'

Intuit's earnings report marks a "clean bill of health" for the company, Beck said in a Thursday note. 

The strong performance is highlighted by Small Business and Self-Employed Care revenue coming in $18 million better than expected at an estimated $833 million, the analyst said. Online services revenue of $163 million and $277 million in cumulative QuickBooks Capital origination were also stronger than expected, he said. 

Intuit's commentary on payments was also positive, with an increase in customer recommendations for its next business day payments products, Beck said.

 As expected, the simplification of the tax code resulted in some consumers moving to lower or free tiers, but some customers also moved to higher tiers to take advantage of TurboTax Live products, the analyst said. 

The bullish case for Intuit's stock is based on the "underappreciated" opportunity the company has to monetize the small- and medium-size fintech services market and the "positive" consumer finapp opportunity, according to KeyBanc. 

Price Action

Intuit shares were up 6.77 percent at $250.94 at the close Friday. 

Related Link: The IRS Is Open And Taxpayers Are Filing: What It Means For Intuit