Intuit (INTU) posted a solid FQ3 yesterday, beating both revenue and EPS expectations and raising guidance. This wasn’t enough for Citi, however, which cut the stock from Buy to Hold, cut estimates, and cut its target from $35 to $32. Citi is concerned over a lack of catalysts as tax season ending as well as a deceleration in segments outside of tax preparation:
FQ3 posted upside thanks to strong TurboTax and share buy-back. Segments outside Tax decelerated, partly due to tough econ. and execution issues. We believe this reflects a maturing process in a great franchise as revs near $3Bn, op mgns are flat for ~3 yrs, & EPS growth slows to low-to-mid teens %, even after multiple acquisitions.
In the near-term, we see few catalysts as tax season is over, and stock tends to languish in Jun.-Aug. period (avg. +2.5% in 2003-07) with more down yrs than up yrs. We lower our TP to $32 (=17x our new CY09 EPS) and recommend a Hold rating.