3 Reasons Intuit Stock Could Fall

Filed in Accounting, Business, Intuit QuickBooks, Xero by on February 2, 2016

Here is a comment I added to this Motley Fool post.

3 Reasons Intuit Inc. Stock Could Fall” has a VERY IMPORTANT ERROR, though I do not doubt its conclusion. The Intuit QuickBooks Online publicity person recently made the same error. That is, “QuickBooks Online subscribers rose 57% last quarter, bringing the total subscriber base to nearly 1.2 million.” You can see the correct information in the most recent (11/15/15) Intuit Fact Sheet. You will see (under Business Metrics), that Q1 FY16 subscribers were indeed 1,159,000. However, they were 739,000 during Q1 FY15. That means the 57% growth number is accurate, but it is for ANNUAL growth (as of the end of this quarter), not quarterly growth. The Intuit Fact Sheet also has Guidance estimates for QuickBooks Online. This is 47% for Q2 FY16 year-to-year growth. The full FY16 growth estimate is only 35% to 40%.

Even worse, for Intuit, QuickBooks Desktop unit sales dropped from 1,124,000 in FY14 to 862,000 in FY15 (down around 23%). FY QuickBooks Desktop sales dropped by 262,000, while the number of QB Online subscribers rose by only 392,000 (1,075,000 – 683,000). Still worse, FY QB Online revenue rose only to $218 million, from $160 million (up only 37%), while QuickBooks Desktop and subscription revenue dropped from $476 million to $341 million, down 28%.

Interestingly, comparable Xero year-to-year subscriber growth was 60%, with revenue increasing by 72%. As a result, Xero (xro.nz Yahoo) stock arose almost 2,000% during its lifetime, while Intuit (INTU) stock rose only around 25% during the same period. This partly reflects that Intuit has been paying out more than all-time cumulative income in dividends and (insider) stock buybacks for several years. The 2/1/16 64.85 Intuit PE (ttm) and $25 billion market cap seem FAR too high for a company with $1 billion in stockholder equity and an EPS (ttm) of $1.49.As i said, I disagreed with the quoted statement, but certainly agree with the conclusion that Intuit Inc Stock Could Fall. Of course, as with the real estate mortgage debacle, the many financial institutions holding Intuit stock could easily make its stock rise, as insiders keep unloading.

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