Intuit: Buying on the Dip

Wall Street can be a cruel place. If your earnings do not meet
expectations, then your stock is likely to be massacred.

This is what happened to Intuit (INTU)
, when the company recently announced that it matched analysts
forecasts.

The company had profits of $91.4 million or 44 cents a share in the last
quarter. This compares to $89 million or 44 cents a year ago.

The main products – Quicken, TurboTax and QuickBooks – rang-up sales of
$425.5 million, up from $373.7 million in the same quarter a year ago.
These main products are traditional software products. Yet, they are
growing strongly. Profits from these products have been shifted into new
markets, such as Internet-focused products.

In all, the company had $89.1 million in Net sales, which was almost three
times last year’s sales. The Quicken.com site has become a destination
point for personal finance. In January, there were 257 million page views.
This compares to 95 million in October 1999.

Looking deeper at the Net operations, there is definitely lots of good
news. Intuit announced that it had a 500 percent surge in the number of tax
returns filed on the Web in the past quarter. As of February 13 of this
year, 405,000 federal returns were filed using the TurboTax online service.

The company’s new small-business accounting package, QuickBooks 2000, is
built for the Net. Interestingly enough, it comes with many value-added
services, such as hosting a company’s site and merchant account services.

The new CEO of the company, Steve Bennett, calls Intuit’s strategy
e-finance. With its strong brand and distribution, the company can quickly
scale itself into a myriad of product lines, such as loans, insurance, bill
payment and tax filings.

Of course, as Intuit transitions towards e-finance, it will not be a smooth
ride. The two factors accounting for much of the failure to meet earnings
expectations include: the integration of the acquisition of Rock Financial
(a mortgage company that allows Intuit to provide better online mortgage
services) and aggressive discounting of TurboTax, so as to counteract
Microsoft’s Tax Saver product.

However, the recent fall in the stock should not be a concern. Intuit
remains a dominant player in e-finance. If anything, it looks like a great
opportunity.

Intuit may be attractive at current levels. Do you agree? Discuss it here


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