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Intuit Shares Jump After Goldman Upgrades to Buy on Earnings

In various sectors, Intuit 'has multiple years of high-teens [revenue] growth and 20%-plus profit growth ahead of it,' Goldman says, upgrading the stock.
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Intuit  (INTU) - Get Intuit Inc. Report shares jumped as Goldman Sachs upgraded the financial software company to buy and raised its price target to $840 from $535, after its earnings report Thursday.

“We have conviction that across the small- and medium-sized business, consumer and Credit Karma segments, Intuit has multiple years of durable high-teens [revenue] growth and 20%-plus profit growth ahead of it,” Goldman analyst Kash Rangan wrote in a commentary.

“We raise our price-earnings and free-cash-flow multiples to represent a premium versus large cap peers, versus in line before, given our expectation for faster growth.”

The stock recently traded at $686.70, up 9.2%. It has skyrocketed 66% over the past six months.

Rangan says that Wall Street "is underappreciating Intuit’s:

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“1) durable growth opportunity to move up-market with higher priced products in both the SMB (QBO Advanced) and consumer tax (TT Live) segments;

2) secular tailwinds, with the pandemic accentuating the shift of both consumers and businesses to adopt digital-first mindsets;

3) the profitability flywheel from the shift to higher annual percentage rate change offerings, higher user engagement and retention; and

4) synergies between core Intuit and the Credit Karma and Mailchimp acquisitions.”

In addition, “we believe Intuit will approach fiscal 2024 with $17 billion of revenue and about 40% operating margins, similar to Adobe  (ADBE) - Get Adobe Inc. Report in fiscal 2021 at $16 billion of revenue and a mid-40s percentage point operating margin, at 1.8 times the market cap [of Intuit],” Rangan said.

“At $686, INTU stock trades at 53 times our calendar year 2022 EPS estimates, with peers [Microsoft]  (MSFT) - Get Microsoft Corporation Report, ADBE [and Salesforce]  (CRM) - Get salesforce.com, inc. Report at an average of 49.”