Intuit (INTU) aids consumers, small businesses, and the self-employed to flourish by providing financial management, compliance products, and services. The company offers specialized tax products to accounting professionals, who are key partners to Intuit’s goal of serving small business customers.
Specifically, Intuit’s global products and platforms, comprising TurboTax, QuickBooks, Mint, and Credit Karma, are developed to help consumers and small businesses manage their finances, save money, pay off debt, and file their taxes with convenience and confidence, so they are obtaining the maximum refund they deserve.
Intuit’s Moat
In my view, Intuit’s investment case illustrates multiple qualities, and it’s relatively a safe one. The reason is the company’s revenues are essentially recession-proof, as demonstrated by its robust sales growth last year despite the hurdles arising from COVID-19. While nothing is foolproof in life, it is safe to say that taxes won’t disappear, and Intuit dominates the latter.
The company has conquered its industry, closing more than 37 acquisitions over the past few years. With lighthearted levels of worrying competition, its suite of products will be there to help people pay their inescapable taxes, while Intuit constantly enjoys a recurring stream of revenues. The company’s sales resilience goes back for decades. Even in the midst of the Great Financial Crisis, Intuit was able to grow earnings by around 7%.
Recent Performance
Intuit’s consistent growth has shown little to no signs of slowing down, remaining impressive as of its latest results. The company’s Q1-2022 results illustrated another exciting quarter, including Intuit expanding its “Small business and Self-employed” revenues by 22% and its Online Ecosystem revenues by 36%.
QuickBooks Online accounting sales increased 32% year-over-year as well. Total revenues grew 52% to $2.01 billion, with growth powered once again largely by customer growth, mix shift, and higher effective prices.
With regards to its profitability, non-GAAP EPS came in at $1.53, 63% higher vs. the prior-year period, following higher sales. Management mentioned they remain focused on the acceleration of Intuit’s innovation-driven AI strategy and its five Big Bets, including clamping its customers with professionals, unlocking smart money decisions with Credit Karma, and revolutionizing the small business mid-market with QuickBooks by offering specialized solutions.
Following a strong start to the year, the company hiked its guidance for the full year, with revenues now expected to be between $12.16-12.3 billion, implying a ~27% growth rate year-over-year, and non-GAAP EPS to be $11.48 to $11.64, suggesting a growth rate of around 18%-20%.
Hence, Intuit’s explosive growth is set to continue quite strong through the current year as well, illustrating the company’s market-leading position and moat qualities mentioned earlier once again.
Wall Street’s Take
Turning to Wall Street, Intuit has a Strong Buy consensus rating, based on 16 Buys assigned in the past three months. At $763.50, the average Intuit price target implies 38.6% upside potential.
Conclusion
Intuit’s shared have managed to reward investors with robust returns over the past few years, beating the popular market indices by a broad margin. That said, investors should take note of the stock’s expanded valuation multiple. At the midpoint of management’s guidance, the stock is trading with a rich P/E of 47.6 attached at its current price. I am bullish on the stock.
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