Intuit’s share price: What to expect in Q1 earnings

Intuit’s [INTU] share price appears to be on a relentless upwards trajectory, only hindered in 2020 by a dip in March, as the impact of the coronavirus pandemic became clear on the markets. The stock fell from just above $300 in February to a 52-week low of $187.68 on 24 March. Since then, Intuit’s share price has made impressive gains, rising 100.95% to hit an all-time high of $377.15 on 9 November, before closing last week at $356.95.

The accounting and tax software technology firm delivered a positive Q4 update, but the impact of Covid-19 on small businesses continues to be key to its short- to medium-term outlook. Management withdrew guidance for its fiscal 2020 in May, over uncertainties relating to the pandemic’s impact on small businesses. Any earnings miss in its Q1 update could hit investor confidence, putting the brakes on Intuit's share price rise.

When is Intuit reporting Q1 earnings?

19 November

What happened last quarter?

In Q4, Intuit reported revenue growth of 83% to $1.8bn, up from $994m in the prior year. Over the full year, revenue climbed 13% to $7.7bn. Earnings per share in the quarter came in at $1.81, which beat both the consensus estimate of $1.11 and the prior year’s Q4 EPS of -$0.09.

In the firm’s Q4 update, CEO Sasan Goodarzi said “We had a strong fourth quarter capping off a dynamic fiscal 2020. After seeing an impact on small businesses from shelter-in-place during the third quarter, we saw trends across our business improve during the fourth quarter, highlighting the resiliency of our platform.”

"We had an outstanding tax season, growing the do-it-yourself category overall … while posting the strongest customer growth in four years. TurboTax Live had another great season." Goodarzi added. The impressive performance in this quarter, coupled with a record of surpassing EPS estimates, bodes well for Intuit’s share price ahead of Thursday’s update.

Why should investors care about Intuit’s share price?

Short-term pain, long-term gain?

The company is clearly concerned about the pandemic’s effect on small enterprises, which make up most of its client base, and recent analysis from investment website Zacks bears this out: “Intuit’s near-term prospects look gloomy as the coronavirus-led global lockdown has affected small businesses, posing risks to its top-line growth.”

Despite this concern, there are a number of positives for Intuit’s share price prospects in the longer term. Zacks notes that Intuit is “witnessing recovering trends across its platforms, including improved retention rates and payment volumes. Small businesses are accelerating their shift to online and omni-channel commerce, a trend that Intuit is well-poised to benefit from.” In addition, Zacks highlights momentum in QuickBooks, growing demand for TurboTax Live, and a shift to cloud-based subscriptions.

Will Credit Karma takeover be approved?

In February, Intuit announced it had agreed a $7.1bn takeover of upstart rival Credit Karma, but antitrust experts were quick to cast doubt over the deal. The acquisition would mean a dominant firm eliminating a competitor, and would obstruct American consumers seeking free tax options, so the Department of Justice has launched an investigation.

While Intuit had a 67% market share in online tax preparation last year, according to ProPublica, Credit Karma has been making inroads with its free tax-filing offering — which it said grew by 50% last year — helping it to become one of the preferred financial apps for millennials. Credit Karma’s market share is currently around 3% and growing, and the firm has gained more than 100 million users, according to Bloomberg analyst Eric Newcomer, “including about half of all US millennials – twice as many as Intuit”.

Intuit has said it expects the deal to go through this year, so any news will be closely-watched by investors – if the deal does get blocked by the Department of Justice, the blow could hit Intuit’s share price.

What is Wall Street expecting?

Intuit is expected to post quarterly earnings of $0.42 per share, according to the Wall Street Journal, which would be 2.43% higher than Q1 a year ago. For comparison, Zacks estimate a year-on-year EPS decline of 7.3% to $0.38. First-quarter revenue is expected to rise 3.3% year-on-year, to $1.2bn, say Zacks.

Among the analysts tracking the stock with the Wall Street Journal, Intuit’s share price has an average target of $366. This would represent a 2.02% upside on Intuit’s share price as of 17 November’s close. Of the 21 analysts offering recommendations on the WSJ, 12 rate Intuit a Buy, with seven Hold and two Sell ratings, giving Intuit’s share price a positive overall rating of Overweight.