Intuit's AI, Market Expansion Position It For Long-Term Growth: Goldman Sachs

Goldman Sachs analyst Kash Rangan reiterated a Buy rating on Intuit Inc INTU on Thursday and maintained a price forecast of $800.

While competition in the lower end of the tax market has intensified early this tax season, the analyst believes Intuit is well-positioned to capture a significant share in the higher-value assisted and business tax sectors.

Lower-value filers, easily attracted by price, offer reduced lifetime value (LTV) for Intuit. Despite this, the company has adapted its go-to-market (GTM) strategy with the introduction of a $19 TT SKU to boost free-to-paid conversions, noted the analyst.

However, the analyst sees a greater opportunity in attracting more loyal filers, which could support growth both in the short and long term.

By prioritizing product-led growth and investing in AI, Intuit is likely to drive innovation and strengthen its brand. The analyst believes this won’t come at the cost of marketing spend, as the CEO has highlighted promising engagement with new campaigns, supporting expectations of 7% to 8% Consumer revenue growth this year and at least 60 basis points of operating margin expansion.

The analyst anticipates that market confidence will build as weekly tax data is released over the coming weeks. While the market is focused on these short-term metrics, especially considering the high margins of tax services, the analyst still views Intuit as undervalued.

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The market seems to be overlooking the company's reset of both near and long-term guidance, its expanding market presence (business tax, Inuit Enterprise Services), and its ability to benefit from an improving macroeconomic environment.

The analyst believes Intuit is poised for several years of consistent growth, with mid-teens+ revenue expansion and 20%+ profit growth.

The company is in the early stages of a strategic transformation that will emphasize increasing revenue per customer to drive margin expansion, as opposed to its traditional focus on unit growth.

This change will be fueled by expanding its total addressable market (TAM), cross-selling and up-selling higher-priced online services, and tapping into international markets, Rangan noted.

The timing of this shift is favorable, as the pandemic has accelerated the adoption of digital services by both consumers and businesses, and there is an increasing appetite for digital services among small and medium-sized businesses (SMBs).

While the macroeconomic environment may create some near-term headwinds, Intuit's critical offerings and shift toward a more recurring/subscription-based revenue model should result in a more predictable growth trajectory, even in a more challenging spending climate, concluded the analyst.

Price Action: INTU shares are trading lower by 1.52% at $581.25 at last check Friday.

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