Intuit Earnings: Firm Posts Revenue Beat From More Intuitive Platforms; $550 Fair Value Estimate

Wide-moat Intuit closed its fiscal year nicely, with revenue well above our expectations as Intuit’s innovations (largely propelled by artificial intelligence) are creating value. While earnings per share came in under our forecasts, restructuring costs were to blame—leaving us unconcerned about broader implications. We are raising our fair value estimate for the wide-moat name to $550 per share from $520 as we see AI bets—especially in connecting users to live experts—pay off. Nonetheless, we find it very difficult to grasp the market’s valuation of the name—as our $550 fair value already implies exceptional margin expansion (over 10 points in five years) and a five-year revenue compound annual growth rate of 10%. We think our top-line expectations are fair, given that there are greater risks for the firm as the Internal Revenue Service is in the early but promising stages of its filing software. In addition, the firm is getting into more crowded, competitive spaces, like omnichannel commerce platforms.