Intuit: “Quality” Now Less Expensive after Q3 FY24 Results

(INTU US) Company Update (Buy): Shares fell 8.4% on Friday after results, and valuation reflects a premium for Intuit’s long-term resilience and growth.

Highlights

• Main negative was volume and market share losses in Consumer (TurboTax).

• TurboTax was deprioritising the low end, and Consumer revenues grew 8.1%.

• Group revenues grew 12% in Q1-3 and are guided to grow 13% in FY24.

• At $606.99, P/E is 36x FY24 Non-GAAP EPS but ~56x on GAAP EPS.

• IRR is likely mid-single-digits near-term but trending to mid-teens over time.

Introduction

We revisit Intuit after shares fell 8.4% on Friday (May 24) following Q3 FY24 (February-April) results the evening before.

We believe Friday’s share price decline was due to investor fears that Intuit’s Consumer business (TurboTax) has started to lose market share, while Intuit’s relatively high headline valuation left little room for disappointment.

The Consumer segment is evolving and is only ~35% of total segment EBIT. Revenue growth this year is expected to be at the low-end of the 8-12% long-term target, but management still expects to achieve the latter. While Intuit is losing share among lower-value customers, this is offset by gains in the higher-value and relatively new Assisted category.

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