Intuit Needs Good Karma -- Heard on the Street
21 March 2021 - 1:29AM
Dow Jones News
By Dan Gallagher
Once again, an extension of tax season will tweak Intuit's
business flow. But the more important question facing the financial
software provider is who needs help -- and how much.
The Internal Revenue Service said Wednesday this year's tax
filing deadline for individuals has been extended to May 17. That
is a month later than normal and will likely push a big chunk of
revenue from TurboTax and the company's other tax-related services
into the fiscal fourth quarter that ends in July. Last year's
even-longer extension of the filing deadline to July 15 resulted in
24% of Intuit's full-fiscal-year revenue coming in the final
quarter, compared with an average of about 15% over the previous
six years.
A timing shift doesn't necessarily mean a loss of business.
Intuit actually raised its fiscal 2021 projection in its latest
earnings report on Feb. 23, when speculation was already swirling
about another filing deadline extension. Intuit's stock -- which
slipped initially on news of the IRS extension -- recovered and is
now up nearly 77% for the past 12 months. That has put the shares
at a historically high multiple of around 41 times forward
earnings.
That means investors still expect a lot from Intuit, regardless
of when taxes come due. The company projected full-year revenue
would grow in a range of 15% to 17% -- an acceleration relative to
the 13% growth posted for the previous two years. But much of that
acceleration appears to be due to Credit Karma, which Intuit
acquired in December. Intuit expects Credit Karma to add between
$545 million and $580 million in revenue this year. Without that
addition, the company's growth for the year would be in the range
of 8% to 10%, its slowest since fiscal 2015.
The Credit Karma deal was more than six times Intuit's
next-largest acquisition and was driven by the company's desire to
expand its financial service offerings to consumers. It also
absorbed a competitor that was providing free tax-preparation
services. Free remains a competitive threat to Intuit --
particularly if the federal government ever gets into the business
of allowing taxpayers to prepare and file directly without use of
middleman software.
But the bigger near-term question is whether Intuit can expand
its nontax business while also growing TurboTax beyond the
do-it-yourself crowd. A new "full-service" version of the TurboTax
Live service launched in December that allows users to connect
online with a tax professional for assistance with their filings.
The explosion of retail investing could give it a surprising lift;
Keith Weiss of Morgan Stanley says the creation of 8 million new
brokerage trading accounts in 2020 should give a boost to Intuit's
revenue per return "as filers with investment portfolios get pushed
to higher-priced [products]." Someone has to add up all those
capital gains on GameStop.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
March 20, 2021 10:14 ET (14:14 GMT)
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