BofA, Guggenheim Positive On Intuit Ahead Of Tax Season

Tax preparation software provider Intuit Inc. INTU reported Thursday after the close with forecast-beating first-quarter results and issued upbeat second-quarter guidance. 

The Analysts

Bank of America Merrill Lynch analyst Kash Rangan reiterated a Buy rating on Intuit with a $225 price target.

Guggenheim Securities' Ken Wong maintained a Buy rating and lowered the price target from $250 to $240.

BofA: QuickBooks, Turbo Tax Live Are Long-Term Growth Drivers

Intuit's quarter was solid across the board, led by small business online subscribers and revenue, BofA's Rangan said in a Tuesday note.

The acceleration in online services revenue from 34 percent in Q4 to 36 percent in Q1 is surprising, the analyst said. 

Small business online has the potential to sustainably grow revenue by 30-percent long term, reaching $2 billion by 2020, he said. 

Heading into the seasonally strong tax season, Rangan said he expects Turbo Tax Live to drive unit and ARPU upside. The analyst views Intuit's 2019 guidance as conservative. 

Adjusting the prior year results on ASC606, BofA raised its 2019 and 2020 revenues estimates slightly and EPS estimates by 14 cents and 5 cents, respectively.

QuickBooks and Turbo Tax Live are key growth drivers long-term, according to BofA. 

Guggenheim Remains Positive On Intuit

Intuit's upside was driven by small business and to some extent by the consumer sector, Guggenheim's Wong said in a Monday note. Despite the Q1 outperformance and the sustainability of strength suggested by underlying business trends, the company maintained its 2019 revenue guidance, the analyst said. 

Given Intuit's plan for aggressive spending on Turbo Tax Live early in the tax season, the analyst issued a conservative margin forecast.

Intuit attributed the strong showing in the quarter and upbeat Q2 guidance to execution and better demand, Wong said.

"We believe investors will view the front-end loaded year as de-risking full year numbers and increasing the likelihood of upside to estimates." 

Guggenheim remains positive on Intuit's near- and long-term financial trajectory, the analyst said. The 9-11-percent growth forecast for small business in FY19 is conservative, likely engendering upside, Wong said. 

Intuit is one of the better-positioned software companies should macroeconomic conditions worse, according to Guggenheim. That said, the firm lowered its terminal multiple from 14x to 13x reflect compression in market multiples.

The Price Action

Intuit shares were down 2.39 percent at $194.48 at the time of publication Tuesday. 

Related Links:

Intuit: Making Tax Accounting Sexy

The Bull And Bear Cases For Intuit After A Q3 Beat

Photo courtesy of Intuit.