On a day when stocks rallied on expectations of lower interest rates, Intuit Inc. (NASDAQ: INTU) was the biggest loser on the S&P 500. Shares of the financial services company known for the QuickBooks and TurboTax brands were down 6.8%.
With the exception of a large dip in INTU stock after the company’s first-quarter earnings report in May, the stock has been trading in a defined range. That makes it a laggard among many technology and fintech stocks in 2024.
And the post-earnings drop has pushed the stock negative for the year. However, it’s still up 19.4% in the last 12 months. Should investors be looking to buy this dip in INTU stock?
Intuit: Investors Are Selling the Guidance
This earnings report marked the end of Intuit’s 2024 fiscal year. The headline numbers were impressive. Revenue of $3.18 billion was 17% higher year over year (YoY). The company also posted revenue for the full year of $16.3 billion, a 13% YoY increase.
Earnings per share of $1.99 beat analysts’ expectations for $1.85 and were 20% higher YoY. But the company issued softer forward guidance that spooked investors.
The company is projecting first quarter GAAP EPS between 61 and 66 cents, which is lower than analysts’ forecasts. Plus, for its fiscal year 2025, the company is now projecting GAAP EPS between $12.34 and $12.54, which is also below expectations. However, in context, the GAAP guidance includes Intuit’s estimates for a $24 million restructuring charge. This comes from the company’s recent reorganization, announced in July.
It’s also important to note that the company’s revenue and non-GAAP earnings are expected to grow in the low teens for the coming quarter and for the full year.
How to View Intuit’s Investment in AI
Intuit is making a significant investment in artificial intelligence (AI). That investment was supposed to be offset by the reduction of about 1,800 jobs earlier this year.
With products like Credit Karma and TurboTax, Intuit seems like a logical choice among companies and applications that will benefit from AI. Tax preparation and accounting are services that align perfectly with the benefits of generative AI. This allows the company to give investors genuine solutions that can help them automate and streamline their own businesses, which is what generative AI has been promising.
However, AI has a larger potential benefit for Intuit. Small businesses are the lifeblood of Intuit’s sales, and inflation and interest rates are hurting these companies disproportionately.
That would seem to make the company vulnerable to competition for its tax preparation business from none other than the Internal Revenue Service (IRS). Earlier this year, the IRS announced the launch of IRS Free File, allowing qualified taxpayers to file their tax returns for free.
That announcement tanked INTU stock in May, but the company’s revenue and non-GAAP earnings forecast shows that in the short term, investors shouldn’t be concerned about customer attrition.
INTU Stock Is Rangebound, but Analysts Are Bullish
INTU stock has soared to a 52-week high around $670 a share multiple times in 2024. But the latest drop is just the latest example of how that is acting as a firm level of resistance. That gives investors an idea of the stock's short-term ceiling, but where is the floor?
The company’s investments in AI will not be immediately apparent. With no catalyst before the company’s next earnings report, Intuit stock is likely to remain rangebound.
But the Intuit analyst ratings on MarketBeat show that analysts are bullish after the report. Six analysts have raised their price targets. Barclays, the one analyst that lowered their price target, reiterated its overweight rating with a price target of $740, 5% above the consensus price target of $703.27.
It bears repeating: there’s no immediate catalyst to drive INTU stock higher. But while you wait, you can collect a dividend that has been growing for 11 consecutive years. The yield of 0.58% isn’t impressive. However, the payout of $3.60 is backed up by a dividend payout ratio of 33% and an annualized three-year dividend growth of over 14%.
