Financial technology giant Intuit (INTU) recently released its fourth-quarter and full-year fiscal 2021 results, which benefited from solid customer growth. Significant contributions from the TurboTax Live segment as well as from its recent acquisition of personal finance company Credit Karma were the primary top-line drivers.
Intuit’s strong balance sheet makes me bullish on the company’s growth prospects. Over the years it has managed to maintain a net cash position in most of the quarters. In the fiscal fourth quarter, the company reported cash and investments of nearly $3.9 billion, while the long-term debt (excluding current maturities) was $2 billion. This net cash balance of around $1.9 billion helps the company pursue strategic acquisitions, invest in growth initiatives, and increase shareholder value. (See Intuit Dividend Date and History on TipRanks)
Strong Outlook Buoys Confidence
An upbeat outlook for the first quarter and full year of fiscal 2022 was the highlight of the announcement. For the fiscal first quarter, Intuit expects year-over-year revenue growth between 36% and 38%, whereas, for fiscal 2022, the company projects revenue growth of 15%-16%. Adjusted earnings are also projected to grow between 13% and 16% year-over-year during the year. Moreover, Intuit expects the growth of its payroll to continue its momentum.
Nonetheless, investor concern around Intuit’s expectations of Credit Karma is likely to loom over the share price in the near term. Also, flat IRS returns in the fiscal year 2022 is likely to be an overhang. Additionally, pent-up demand for credit cards and personal loans that were observed in FY21 might slow down towards the second half of FY22 and return to pre-pandemic levels.
However, that does not seem to deter Guggenheim analyst Kenneth Wong from reiterating a Buy rating on the stock and increasing the price target significantly to $675 from $525. “Management expects a slower recovery internationally than in the U.S., but sees potential for SMBs to bounce back much faster internationally once the pandemic is more manageable in those regions,” he observed.
Wong also expects several features to increase the average revenue per user. Among them are Turbo Tax Live, which connects customers to tax experts, and QuickBooks Live, which connects customers to bookkeepers, along with Turbo Tax Premier, which maximizes deductions, and QuickBooks Premier, which gives users tools tailored to their industries. In turn, that will benefit the Consumer business. He said, “We believe the Consumer segment has the potential to be a sustainable teens grower over the medium- and long-term.”
The analyst is most positive about Credit Karma, believing that it holds the greatest potential to drive Intuit’s top-line performance. “We believe the evolution of Credit Karma into a multi-purpose consumer finance platform could trigger investors to see Intuit as a legitimate Payments company, which we believe will unlock the value hiding in plain sight,” he said.
Wong also expects investors to consider the potential around the gradual upmarket move in Intuit’s Small- and Medium-sized Business segment, where “QuickBooks Live traction and the reacceleration of Online Ecosystem growth back above 30%” are potential growth catalysts.
Overall, the stock has a Strong Buy consensus, based on 12 Buys and 1 Hold. The average Intuit price target of $614.55 implies 10.6% upside potential from current levels.
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