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Intuit (INTU) Continues to Lose Ground: Should You Hold?

Zacks Equity Research
Updated

It has been over a month that Intuit Inc. INTU reported fourth-quarter fiscal 2016 results. Since then, shares of the company have been on a downtrend.

Since its last earnings release on Aug 23, the stock has lost over 4%. The drop was because of the company’s tepid near-term guidance rather than the quarterly numbers.

INTUIT INC Price

INTUIT INC Price | INTUIT INC Quote

During its last quarterly results, the company provided revenue guidance for the first quarter of fiscal 2017, which was way below the Zacks Consensus Estimate. Intuit has anticipated revenues in the range of $740 million to $760 million (mid-point $750 million), while the Zacks Consensus Estimate was pegged at $780 million at that time.

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Nonetheless, in our opinion the recent weakness seen in Intuit is temporary, as the company is well poised to grow on strategic initiatives.

We are positive on Intuit’s growing exposure to small and medium businesses and believe that its strategic acquisitions will boost the segment. Increasing adoption of cloud-based services and products is another big positive.

Moreover, Intuit has restructured its business to focus better on QuickBooks. The company expects to continue investing in the portfolio, which will likely hit its near-term profitability, yet lead to substantial benefits over the long term.

The company is also concentrating on reimaging its products with the new mobile design. Its TurboTax solutions help customers prepare and file online tax returns through tablets, mobiles and desktop computers. These offerings are expected to expand its customer base, going forward.

However, rising competition from payroll solution providers such as Paycom Software Inc. PAYC and Automatic Data Processing ADP is a concern, considering the seasonality of Intuit’s tax business and the ongoing economic uncertainty.

Currently, Intuit has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the Software industry is Paylocity Holding Corporation PCTY. The company provides cloud-based payroll and human capital management software solutions for medium-sized organizations. Paylocity sports a Zacks Rank #1 and has a long-term EPS growth rate of 20%.

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PAYCOM SOFTWARE (PAYC): Free Stock Analysis Report
 
INTUIT INC (INTU): Free Stock Analysis Report
 
AUTOMATIC DATA (ADP): Free Stock Analysis Report
 
PAYLOCITY HLDG (PCTY): Free Stock Analysis Report
 
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Zacks Investment Research