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Stock Analyst Update

Intuit: 10% Full Year Revenue Growth Ahead?

The wide-moat firm's focus on improving its customer experience seems to be resonating well with clients, in addition to continual development of new product features.

 Intuit’s (INTU) Small Business & Self-Employed group reported a strong start to the fiscal year. The small business performance helped to boost Intuit’s total revenue growth and we think it sets the company up to achieve full-year revenue growth around 10%. The growth in QuickBooks Online, or QBO, subscribers continues to underpin the firm’s success in the small business and self-employed arena and the company finished the quarter with 2.55 million QBO subscribers (up 56% year over year and 7% sequentially). Management did note that they expect a slowdown in QBO subscribers in the second half of the fiscal year due to the introduction of self-employed bundles last tax season. Therefore, the company reiterated its full-year subscriber outlook of 3.275 million to 3.375 million subscribers (implied year-over-year growth of 37% to 42%). Along similar lines, management maintained all of its financial goals for the year. Given the quarter, our fair value estimate of $120 remains unchanged and we reaffirm our wide economic moat rating. With the stock trading at a premium to our fair value, we’d seek a wider margin of safety before investing in the company.

For the quarter, total revenue increased 14% year over year to $886 million. Small Business & Self-Employed revenue grew 17% year over year to $694 million, online ecosystem revenue also increased 35% to $258 million. Intuit’s focus on improving its customer experience seems to be resonating well with clients in addition to continual development of new product features. To that end, the firm’s Net Promoter Score continues to progress at a positive trajectory.

The Consumer group saw revenue rise 7% to $78 million. While the first quarter for the Consumer business is not particularly meaningful, Intuit is working in the offseason to introduce new features to entice customers. TurboTax Live, which leverages live professional help, is one particular feature which the firm is hoping draws new users.

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Andrew Lange does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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