Intuit (INTU), the software company whose flagship products include QuickBooks, Quicken, and TurboTax, is feeling no material impact from the economic slowdown, at least according to their CFO. Credit Suisse agrees and thinks the small business segment will help power the stock:
INTU seems more excited than usual about the functionality in the new QBs [QuickBooks] launch this year, which should give a lift to upgrades, which account for 2/3rds of QB sales. With low penetration rates, INTU’s payroll and payments segments are estimated to grow mid-teens, with the ECHO acquisition having a more positive impact than expected. There is some evidence that suggests a slight pick-up in small business starts, with an increase in unemployment creating a counter-cyclical lift.
Also, Credit Suisse believes consumers may trade down to Intuit’s software versus hiring an actual tax accountant:
We believe Consumer Tax can grow 10-15% in FY09, led by an improvement in customer retention
and category growth of about 10%. We expect INTU to get a lift from converting some of its free tax customers to a paid service in FY09. With the U.S. economy weak, we wouldn’t be surprised to see more tax payers look to INTU instead of higher cost alternatives like tax stores and tax professionals.
INTU reports Q2 earnings on Thursday, August 21st.
Credit Suisse reiterates OUTPERFORM on Intuit (INTU), target $35.
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