Intuit Under-performance Has Stemmed From Valuation Reset, Analyst Upgrades Stock

JP Morgan analyst Mark Murphy upgraded Intuit Inc INTU from Neutral to Overweight and raised the price target from $640 to $660.

Murphy maintained his view of Intuit as a dependable, innovative, and scaled cloud platform that serves consumers, self-employed, small businesses, and mid-market customers while serving as a good steward of capital. The analyst noted stable-to-positive trending across Intuit's core businesses.

Also Read: Intuit Sees AI-Driven Growth With TurboTax, Credit Karma: Analyst Raises Price Forecast

However, risks continue to arise from macro volatility, policy uncertainties, and other idiosyncratic and external variables.

Intuit stock has underperformed to such an extent that it trades below where it was ~3.5 years ago when the term "transitory inflation" was retired in November 2021.

It underperformed versus the S&P 500 by ~3,700 bps (-14% versus +23%) and underperformed versus mega-cap software by an even more considerable margin (-14% versus +30%). This occurred despite Intuit being a widely-held consensus long, with 83% of ratings being buy-equivalent in November 2021.

Some speedbumps were encountered, including a Credit Karma growth reset, a perceived loss of TurboTax market share in recent Tax seasons, and a reduction in long-term growth target models for the Credit Karma and Tax businesses.

However, the company has innovated and executed quite well along many other dimensions, and most of the stock's underperformance has stemmed from a valuation reset, he noted.

The updated price target reflects a shift in peer group multiples and other considerations. The multiple is above the comp group of Scaled Software Vendors with ~10%+ calendar 2026E growth and/or ~20%+ uFCF margin (ORCL, ADBE, CRM, SNPS, ADSK, VEEV, CSPG, and BOX), which trade at ~2.3x on average.

Murphy noted that Intuit warranted a premium to account for the company's relatively less competitive core markets, superior stickiness, and higher perceived value-versus price-paid of the core QuickBooks franchise, leading to a higher pricing envelope and lower volatility of the annual growth profile.

Murphy projected third-quarter revenue of $7.51 billion and adjusted EPS of $10.92.

INTU Price Action: INTU stock is up 1.81% at $608.88 at the time of publication on Wednesday.

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