Analyst Note| Julie Bhusal Sharma |
Wide-moat Intuit’s second-quarter results were in line with management’s updated lower guidance given earlier this month, which was prompted by a slower start to this tax season. The slower start appears to be the result of a greater tendency of putting off tax filing until closer to the IRS deadline, which management suggests has been trending prior to the global pandemic. If anything, we think Intuit can benefit from this trend--as increased procrastination implies more stress and willingness to pay for simple tax solutions--like Intuit's TurboTax offering. We also think that Intuit will benefit from a resource-strapped IRS. The IRS has urged taxpayers to file electronically to avoid lengthy delays in paying out tax refunds and general processing. We think this leaves Intuit's TurboTax offering even more appealing. All considered, we're confident in our maintained fair value estimate of $511 per share, which leaves Intuit stock fairly valued, in our view. While we think the market is pricing Intuit stock within our fair value range, we continue to balk at the Street's median target price of $720 per share, according to FactSet, which surpasses even our bull case fair value estimate of $713 per share due to what we believe are divergences in long-term growth rates.