Intuit (INTU)

Intuit (INTU)

Is Intuit (INTU) stock a good buy?

In this article, we review Intuit, to determine if it’s a good buy, sell, or hold.

Inuit is a financial software company founded in 1983 with office locations in the US, UK, France, India, and Australia.

Table of Contents

Tykr Rating

  • Summary: On Sale
  • Score: 89/100
  • MOS: 86%
  • Share Price: $414
  • Sticker Price: $1,616

Intuit Company History

  • In 1983, Scott Cook was working at Procter and Gamble when he realized that personal computers would replace pen and paper as a means to manage personal and business financials. He approached Tom Proulx at Stanford University to assist with the technical side of the company and their first version of Quicken was coded in Microsoft BASIC.
  • In 1991, Microsoft created a competitive product called Microsoft Money. To win loyalty, Intuit included a $15 rebate coupon for in-store purchases. This is back in the day when you bought software programs on CDs.
  • In 1993, Intuit went public and used the raised capital to buy tax-prep software company Chipsoft. 
  • In 1994, they started seeing impressive growth which led to a market cap of $2B which also led to a buyout offer from Microsoft. The buyout fell apart due to the United States Department of justice’s disapproval. The US Government said this acquisition would have given Microsoft–already the world’s largest software company–a dominant position in the market for personal-finance software and in the emerging electronic commerce business, and thus was in violation of antitrust laws.
  • In the late 1990’s, Intuit continued to see more pressure from Microsoft with its Microsoft Money product. This forced Intuit to innovate and that’s when they started offering cloud-based software as opposed to CDs for both its QuickBooks and TurboTax products.
  • Through the 2000s Intuit continued to see steady growth and solidify itself as the staple for personal and small business accounting.
  • In 2009, Intuit acquired Mint.
  • In 2018, Intuit achieved $5B in annual revenue and a market cap of $50B.
  • In 2020, Intuit acquired Credit Karma.
  • In 2021, Intuit acquired Mailchimp.

Intuit Business Model

Intuit serves over 100 million customers with five different products.

TurboTax – A tax management SaaS product for consumers and businesses. The base product starts at $0/month with limited functionality but scales up to $89/month for consumers and $119/month for small businesses.

QuickBooks – A financial SaaS that handles income, expenses, cash flow, taxes, receipts, mileage, contractors, and more. The base product starts at $15/month and scales up to over $100/month for small businesses and tens of thousands of dollars for mid-sized and enterprises. QuickBooks is used by over 29 million small businesses around the globe.

Mint – A free budgeting app for consumers that allows you to connect all your financial accounts in one digital space so you get a high-level overview of your financial health. The app allows you to track spending and savings as well as set and track budget goals. Intuit generates revenue from advertisements and cross-sells TurboTax.

Credit Karma – A free credit monitoring and cashback rewards software. Intuit generates affiliate commissions on cashback offers.

Mailchimp – An email marketing SaaS for SMBs (Small and mid-sized businesses). The base product starts at $0/month with limited contacts and features but scales well above $299/month. Based on my personal experience with SMBs, I’ve seen organizations pay tens of thousands of dollars a month on Mailchimp due to their massive contact list.

Intuit News

This article from zacks.com says that Analysts are expecting between a 30% and 100% share price increase. Due to the company’s strong financials, the stock ranks as a Buy and is categorized in the top 20% of the 4,000 stocks Zacks is monitoring. 

This article from investorplace.com lists 7 oversold stocks including Adobe, Accenture, Applied Materials, Broadcom, Cisco, Intuit, and Salesforce. Intuit made the list because of its popular and fast-growing Credit Karma app. Consumers can enter the Intuit ecosystem for free which allows Intuit to offer products from other companies, which generates a commission, as well as cross-sell its own products.

This article from investors.intuit.com talks about Intuit’s acquisition of Mailchimp for approximately $12B. This acquisition of Mailchimp gives Intuit 13 million more users with 800,000 users being paid users. Intuit will be able to seamlessly offer QuickBooks to these customers at a discount which will greatly increase the expansion revenue. 

This article from fourlane.com talks about the scalability of Quickbooks. As SMBs scale, there becomes a concern about what ERP (Enterprise Resource Planning) software they should use. QuickBooks has evolved over the last few decades, making itself robust for not only SMBs but in some cases, large enterprises. Here are some of the reasons why enterprises may want to keep using Quickbooks.

  1. QuickBooks allows more than 30 active users per organization. Most accounting departments have less than 30 employees.
  2. QuickBooks has pre-built tools and templates for specific industries like manufacturing, contracting, non-profits, and retail.
  3. QuickBooks has API connections with other software platforms.
  4. Most people underestimate the effort required to move all financial data from one ERP to another. In most cases, it’s best to scale QuickBooks as opposed to migrating to a competitor.
  5. QuickBooks has a large data capacity. Businesses can track up to a million vendors, customers, inventory items, and employees. These numbers are sufficient for most SMBs and some enterprises.
  6. QuickBooks allows for advanced and custom reporting. 
  7. QuickBooks allows businesses to track inventory in multiple locations.

Intuit Competition

Intuit (INTU)

  • Summary: On Sale
  • Score: 89/100
  • MOS: 86%
  • Share Price: $412
  • Sticker Price: $1,616
  • Revenue: $9.6B

Workday (WDAY)

  • Summary: On Sale
  • Score: 50/100
  • MOS: 90%
  • Share Price: $140
  • Sticker Price: $708
  • Revenue: $5.1B

Oracle (ORCL)

  • Summary: Overpriced
  • Score: 33/100
  • MOS: 0%
  • Share Price: $74
  • Sticker Price: $74
  • Revenue: $42.4B

SAP (SAP)

  • Summary: Watch
  • Score: 55/100
  • MOS: 0%
  • Share Price: €90
  • Sticker Price: €90
  • Revenue: €27.8B’

There are a few private competitors worth noting which include Xero, Freshbooks, and Sage. Xero and Freshbooks are more focused on small businesses whereas Sage is focused on SMBs, similar to QuickBooks.

Intuit 4M’s

MOS: Intuit’s financials are outstanding. With a score of 89/100 and MOS of 86%, they are nearly perfect.

Meaning: TurboTax and QuickBooks are the #1 most trusted brands for consumer tax management and small and mid-sized bookkeeping. What really makes Intuit unique is the addition of Mint, Credit Karma, and Mailchimp. Both Mint and Credit Karma attract massive consumer volume which allows Intuit to generate revenue from advertising and cross-sell other products including TurboTax and QuickBooks. Mailchimp is a great play because it allows cross-selling between Mailchimp and Quickbooks. 

Moat: If you look at each individual product on its own, they all have competitors. In this case, Intuit’s strong brand and the sum of its parts make it stand out from the competition. 

Management: Sasan Goodarzi has been serving as CEO since 2019. Prior to CEO, he worked at Intuit for 14 years in various roles including EVP and GM of the small business and self-employment group, EVP and GM of the consumer tax group, CIO, GM of the ProTax organization, and GM of financial services. Prior to Intuit, he worked at Invensys, a global provider of industrial automation, transportation, and control technology. He also served as CEO of Honeywell and co-founder of startup, Lazer Cables. His 14 years at the company working for various divisions is what stands out to me. This has allowed him to build a strong understanding of each division which provides a strong understanding of how to scale and cross-sell products.

Intuit Financials

Now let’s take a look at the financials. A wise investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

Revenue (Found on the Income Statement)

  • 2018: $5.9
  • 2019: $6.7
  • 2020: $7.6
  • 2021: $9.6
  • Revenues have consistently increased year over year which is a great sign.

Net Income (Found on the Income Statement)

  • 2018: $1.2B
  • 2019: $1.5B
  • 2020: $1.8B
  • 2021: $2B
  • The net income has consistently increased year over year which is a great sign.

EPS (Found on the Income Statement)

  • 2018: 4.72
  • 2019: 5.99
  • 2020: 6.99
  • 2021: 7.65
  • The EPS has consistently increased year over year which is a great sign.

Free Cash Flow (Found on the Cash Flow Statement)

  • 2018: $1.9B
  • 2019: $2.1B
  • 2020: $2.2B
  • 2021: $3.1B
  • Free Cash Flow has significantly increased in 2021 which is a great sign.

Total Assets (Found on the Balance Sheet)

  • 2018: $5.1B
  • 2019: $6.2B
  • 2020: $10.9B
  • 2021: $15.2B
  • Total Assets have significantly increased in 2020 and 2021 which is a great sign. Part of this is due to the acquisition of Mailchimp in 2021.

Total Liabilities (Found on the Balance Sheet)

  • 2018: $2.8B
  • 2019: $2.5B
  • 2020: $5.8B
  • 2021: $5.6B
  • Total liabilities have increased in 2020 but slightly decreased in 2021 which is a good sign.

Total Debt (Found on the Balance Sheet)

  • 2018: $438M
  • 2019: $436M
  • 2020: $3.3B
  • 2021: $2.4B
  • Total debt has increased in 2020 but slightly decreased in 2021 which is a good sign.

Total Equity (Found on the Balance Sheet)

  • 2018: $2.3B
  • 2019: $3.7B
  • 2020: $5.1B
  • 2021: $9.8B
  • Total Equity has significantly increased in 2021 which is a good sign.

Is Intuit stock a good buy?

Intuit is a strong buy as all 4M’s look great. This is a business that generates revenue from B2C SaaS products, B2B SaaS products, advertising, and affiliate commissions. I really like the fact that they can attract massive consumer volume with the free products, Mint and Credit Karma, and then cross-sell paid products including TurboTax, QuickBooks, and Mailchimp.

At the moment, I currently hold Atlassian (TEAM) in my portfolio. My plan is to let the market recover which will likely drive the Atlassian share price up. At that time I’ll sell my shares for a profit and allocate that capital to Intuit.

If you’re looking for a stock with a strong brand moat and diversified revenue streams, this is one to consider.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.

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