In 2021, Mailchimp owner Intuit (NASDAQ: INTU) brought in $9.6bn in revenues and over $2bn in profits. Fast forward a year, and revenues rose 32% to $12.72bn with a similar profit of $2bn in fiscal 2022.
The company owns several popular software systems integral to modern business, and its recent growth trajectory is impressive. However, INTU stock has suffered this year, and the company share price is far below its November 2021 high.
Its debt has rocketed in the past year, and margins are under pressure, so investors will be keen to see how it fares in Q1. Intuit will report its next quarterly update on November 21. FactSet analysts have an EPS consensus of $1.21 and a sales consensus of $2.48bn. EPS guidance lies between $1.14 and $1.20, while sales guidance comes between $2.47bn and $2.51bn.
What is Intuit?
Intuit's popular software offerings include QuickBooks, Credit Karma, TurboTax, Mailchimp and Mint.
Intuit Inc. develops and markets business and financial management software solutions for small and medium-sized businesses, financial institutions, consumers, and accounting professionals. The company provides business management, payroll processing, personal finance, tax preparation, and filing software solutions. Intuit serves customers worldwide.
Q4 and Full-Year Update
For the full 2022 fiscal year, including the addition of Mailchimp beginning November 1, Intuit:
Grew total revenue to $12.7bn, up 32% Y/Y, including 8 points from the addition of Mailchimp.
Increased combined Platform revenue, which includes the Small Business and Self-Employed Group Online Ecosystem, TurboTax Online and Credit Karma, by 45% to $9.6bn. This includes 11 points from the addition of Mailchimp.
Grew Small Business and Self-Employed Group revenue by 38% and Online Ecosystem revenue by 61%. Excluding Mailchimp revenue of $762m, Small Business and Self-Employed Group revenue grew by 22%, and Online Ecosystem revenue grew by 34%.
Grew Consumer Group revenue by 10% to $3.9bn.
Increased Credit Karma revenue to $1.8bn.
Reported GAAP operating income of $2.6bn, up 3%.
Reported Non-GAAP operating income of $4.5bn, up 29%.
Reported GAAP earnings per share declined by 4%, and non-GAAP earnings per share grew by 22%.
For Q4, Intuit:
Reported total revenue of $2.4bn, down 6%, reflecting the earlier IRS tax filing deadline this year, partially offset by the addition of Mailchimp. Excluding Mailchimp, total revenue declined by 16%.
Increased Small Business and Self-Employed Group revenue by 41% to $1.8bn and Online Ecosystem revenue by 66%. Excluding Mailchimp revenue of $265 million, Small Business and Self-Employed Group revenue grew by 20%, and Online Ecosystem revenue grew by 32%.
Grew Credit Karma revenue by 17% to $475 million.
Reported Consumer Group revenue of $145 million, compared to $852 million in the prior year, reflecting the earlier tax filing deadline this year.
Sasan Goodarzi, Intuit's CEO, said:
We had a very strong fourth quarter, ending the year with momentum. We're more confident than ever in our long-term business strategy as we power prosperity around the world,
Our platform and offerings are mission-critical for consumers and small businesses, and we are proud that Intuit is the platform of choice for over 100 million customers.
How Does Intuit Make Money?
Intuit enjoys multiple revenue streams, from software licensing and updates to software subscriptions, referrals, and advertising.
The company's leading range of product offerings allows scope for cross-selling to help it scale.
INTU Stock Financial Metrics
Intuit currently has a $113.07bn market cap.
Over the past year, INTU stock has traded between $339.36 and $716.86. Today it trades at around $417.18. Year-to-date, the Intuit stock price is down -33.9%, while the S&P 500 is down -21.76% over the same period.
INTU stock has a price-to-earnings ratio (P/E) of 57.57, and its forward P/E is 29. Its price-to-book-value (P/BV) is 7.18. INTU stock also comes with a dividend yield of 0.75%.
Since 2009, the company has gone from strength to strength, with revenue growth of 11.4%. This accelerated from the onset of the pandemic, when interest in digital adoption grew, too, particularly in smaller businesses.
While growth appeals to investors, Intuit's aggressive M&A strategy has led the company to become less shareholder-friendly as it issued more shares through employee compensation and increased its debt. EBIT margins were averaging 27%, but this slipped to 20% in 2022.
The debt increase is massive. In 2019, INTU's long-term debt sat at $386m. By 2022 it reached $6.9bn.
Cash soared to $7bn in 2020 but slipped to $3.2bn by 2022.
The company anticipates revenues of $14.48bn to $14.7bn in 2023, which aligns with its pre-pandemic growth rate.
In recent weeks various analysts have adjusted their outlook on Intuit. Oppenheimer reiterated its $516 target, while JPMorgan Chase & Co downgraded INTU stock from Overweight to neutral with a target of $360.
Evercore ISI lowered its price target from $601 to $505. Meanwhile, Deutsche Bank increased its target INTU share price from $525 to $560.
Overall, FactSet analysts have a consensus Overweight rating on INTU stock with a target share price of $521.73.
INTU Growth Potential
Intuit is excited about its Mailchimp acquisition which it sees as central to its ongoing growth strategy.
James Alexander Chriss, Executive VP & General Manager-Small Business & Self-Employed Group, Intuit, Inc, stated:
With Mailchimp, we have a low compliance, universally scalable, and proven global product that solves customers' number one problem of getting customers.
The company will use Mailchimp to entice global customers into its ecosystem.
From a data perspective, Intuit has insight into valuable consumer data from its QuickBooks integrations. This includes consumer spending patterns and employee hiring rates. Providing it puts this knowledge to work, it could streamline when necessary and take risks ahead of the curve. This gives it added value in the eyes of the shareholder.
Furthermore, this inside knowledge gives it confidence in lending to small businesses to get them up and running on their marketing journey to acquire more business and a positive return on investment.
Intuit also intends to bring its full QuickBooks offering into Canada, the UK and Australia, where Intuit is already established.
INTU Investment Risks
The company has racked up considerable debt, and when it's time to renew its loans, this could come at higher interest rates.
Inflation is affecting all businesses to a degree, and Intuit is vulnerable.
Finance is a highly competitive environment, and as consumer confidence wanes, only the most trusted will survive.
With the US believed to be in a recession, spending is likely to slow.
The company has diluted its shares with share-based compensation, which appears to inflate its results.
Tech stocks have fallen out of favor and are subject to increased volatility.
Is INTU Stock a Good Investment?
Intuit is a good company with a solid offering, supporting many small businesses. Nevertheless, as the global economy battles through the next few months, Intuit could be vulnerable to several risks.
The share price remains overvalued, and investors will likely remain cautious as volatility is expected to continue.