Analysts Voice Cautious Optimism On Intuit Following Q2 Earnings

Shares of Intuit Inc. INTU were losing ground Thursday after the Mountain View, California-based software company reported a year-over-year revenue decline in its fiscal Q2 earnings.

Intuit's Numbers: Intuit posted $1.5 billion in second-quarter revenue, down 7% year-over-year.

The company’s Small Business and Self-Employed Group saw its revenue rise 11% year-over-year to $1.1 billion as its Online Ecosystem revenue swelled by 22% to $644 million. Revenue from Credit Karma totaled $144 million since the acquisition closed on Dec. 3.

However, second-quarter revenue from the company’s Consumer Group sank by 71% to $147 million, which Intuit attributed by IRS’ later opening, Feb. 12, versus the previous year, Jan.27.

Intuit Analysts React: Piper Sandler senior research analyst Arvind Ramnani praised the company for “good results across revenue and margins” and predicted a positive 2021 if it maintained its strategic course.

“We would buy INTU on near term weakness as we see upside to FY21 estimates given underlying dynamics in the business, including: increased volume and ARPU in tax filings (driven by retail equity and crypto trading), potential lift in pricing as QB comps get easier, Credit Karma acceleration, and an SMB rebound/reopening,” Ramnani wrote. “However, we note that a fluid macro and slow ramp in hiring could offset some of this upside in the near term.”

Credit Suisse analyst Brad Zelnick highlighted a “surprisingly strong” performance by Credit Karma and noted that “most QuickBooks indicators are back to or better than pre-pandemic levels.” He also noted that while the company’s SMB focus was improving, a “full scale recovery remains elusive.”

On the whole, Zelnick maintained a cautious optimism.

“Guidance for SMB remains unchanged for 9-10% growth for the year despite a strong 1H,” he wrote. "While 4Q2020 benefited from some one-time effects of PPP (est. $30m rev) which would result in tougher comps, we still struggle to fully reconcile the full year guide versus positive comments around SMB health.”

INTU Ratings, Price Targets: Ramnani maintained an Overweight rating and raised the price target from $399.09 to $470.

Zelnick maintained an Outperform rating and maintained the price target at $460.

INTU Price Action: Intuit shares were down 4.86% at $393.08 at last check Thursday.

(Photo by Christin Hume on Unsplash)