Intuit’s [INTU] share price has been a solid performer this year. Since hitting a low of $187.68 in the mid-March coronavirus sell-off, the stock has climbed 65.48% to close at $322.23 on the 21 August. Traders who picked up shares in March are already enjoying a decent profit, but is there more upside to come?
It hasn’t all be plain sailing for the maker of accounting software QuickBooks and TurboTax. Despite the overall gains, Intuit’s share price slid in July and the US government’s decision to delay the deadline for filing taxes saw revenues drop in the third quarter.
Still, Intuit’s share price is up 21.07% year-to-date (through 21 August’s close) and analysts are betting that Q4 earnings will deliver this week.
Are the analysts right to be optimistic about Intuit’s share price? And what should investors watch out for in Intuit’s Q4 earnings?
When is Intuit reporting Q4 earnings?
What could move Intuit’s share price post-earnings?
Intuit saw revenues increase in the first half of the year and it looked like momentum would continue into the third quarter. With the US government delaying its deadline for filing taxes, however, that wasn’t to be:
“...the COVID-19 pandemic resulted in the IRS extending the tax filing deadline to July 15. This caused the timing of millions of tax filings to shift later in the season, resulting in total revenue declining 8 percent in the quarter," said Sasan Goodarzi, Intuit’s CEO.
With revenues down, earnings also took a hit, coming in at $4.11 a share — down 21% from the $5.22 a share seen the previous year. With the upcoming Q4 earnings covering the IRS’s extended tax deadline, Intuit could see an increase in revenue making up for last quarter’s disappointing results.
“...the COVID-19 pandemic resulted in the IRS extending the tax filing deadline to July 15. This caused the timing of millions of tax filings to shift later in the season, resulting in total revenue declining 8 percent in the quarter” - Sasan Goodarzi, Intuit’s CEO
Promisingly, the lucrative small business segment has seen a continued shift to online services. QuickBooks’ online accounting revenue grew 36% while revenue from online services grew 16%. This reflects Intuit’s strategy of ditching legacy systems and moving its products to cloud subscription services. Shareholders should watch for further updates from this business area, especially if the current pandemic has triggered greater adoption, as it could well stand to boost Intuit’s share price.
Despite a disappointing quarter, Intuit still handed out a $0.53 dividend per share. Shareholders will be hoping for a similar or better pay out when Q4 earnings are announced.
What is Wall Street expecting for Q4?
Wall Street is forecasting earnings of $1.04 per share, up a huge 1255.6% from the $0.09 loss seen in the same period last year. Revenues are expected to be $1.56bn, up 55.8% from the £994m seen last year.
Could an earnings beat be on the cards? Intuit has managed to beat expectations in three of the past four quarters. Last quarter’s underwhelming results missed expectations but, given the extenuating circumstances at play, investors might want to disregard that loss. With expectations so high this time around, however, another miss can’t be ruled out.
Intuit's expected Q4 revenue - a 55.8% YoY rise
So, time to buy Intuit?
Intuit’s share price hit a 52-week high after analysts at Wells Fargo hiked their target price to $345. Quite the jump from $300, this new target would see a 7.07% upside on 21 August’s closing price if hit. This is at the top end of expectations, with the stock currently trading 5.4% higher than the consensus $304.75 price target from analysts tracking the stock on Yahoo Finance.
Other targets include $320 from Guggenheim, $315 from KeyCorp and $290 from Morgan Stanley. All of these suggest that Intuit’s share price through 21 August’s close is a shade overvalued.
For Intuit’s share price to hit Wells Fargo’s target, it will need a strong Q4 earnings performance. With expectations so high, any miss could see the share price dip. Other headwinds include a second wave of the coronavirus, which would hit revenue from Intuit’s lucrative small business and self-employed market. But, if most of the disruption is over, Intuit’s share price could stand to rise.
|PE ratio (TTM)||63.56|
|Quarterly Revenue Growth (YoY)||-8.3%|
Intuit share price vitals, Yahoo Finance, 24 August 2020