On Monday, UBS updated its outlook on Intuit (NASDAQ:INTU), the financial software company, increasing the price target to $670 from the previous $625 while keeping a neutral rating on the stock.
The adjustment comes ahead of Intuit's third-quarter fiscal year 2024 earnings report, with UBS analysts pointing to a stronger than anticipated growth in Consumer revenues, which could potentially counterbalance a softer demand outlook for Small Business & Self Employed segments.
The firm's revised estimates anticipate a total revenue growth for fiscal year 2024 to be at 12.5%, a slight increase from the prior forecast of 12.4%. The non-GAAP earnings per share (EPS) estimate is also marginally adjusted to $16.55 from $16.54.
These changes are attributed to an improved growth estimate in Consumer revenues, now expected to rise by 10% year-over-year compared to the previously projected 9%, which is expected to offset the slightly lowered growth forecast for the Small Business & Self Employed segment, now at 16.9% from 17.3%.
The analysts highlighted that despite the challenges faced by several small and medium business (SMB) software companies in the calendar year 2024, Intuit is anticipated to post healthy low-teens growth in Consumer revenues. This is partly due to the price increases in TurboTax (TT) products, which is believed to be achievable and could result in strong margin and EPS performance.
UBS remains neutral on Intuit's stock despite the favorable Consumer revenue outlook. The firm cites concerns over the potential limited upside for fourth-quarter fiscal year 2024 Small Business & Self Employed revenues given the challenging demand environment. UBS's projections align with the lower end of the Street's expectations, modeling a 15% year-over-year growth, which sits at the bottom of Intuit's long-term growth range of 15-20%.
InvestingPro Insights
As Intuit (NASDAQ:INTU) gears up for its third-quarter earnings report, a closer look at real-time data and InvestingPro Tips can provide additional context for investors considering the company's stock. Intuit has demonstrated a consistent ability to raise its dividend, doing so for 13 consecutive years, which speaks to its financial stability and commitment to shareholder returns. Additionally, the company boasts impressive gross profit margins, a key indicator of its efficiency and pricing power.
InvestingPro Data shows a robust revenue growth of 10.3% over the last twelve months as of Q2 2024, with the Consumer segment likely contributing significantly to this expansion. The company's gross profit margin stands at an enviable 79.1%, reinforcing the analysts' positive outlook on Intuit's ability to maintain strong margins. Despite a high Price/Earnings (P/E) ratio of 66.78, which suggests a premium valuation, Intuit's solid fundamentals may justify the higher multiple for some investors.
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