Intuit (INTU) has staged a sharp recovery in recent weeks, climbing roughly 46% from its 2024 low as investors rotated back into beaten-down software names. The stock now trades near $367, its highest level since late May, setting the stage for a pivotal earnings report due Tuesday.
Earnings expectations amid AI disruption fears
The company, known for QuickBooks, TurboTax, Credit Karma, and Mailchimp, has faced significant pressure over the past year. From a record high of $812 in July 2023, shares fell to a low of $253 in July 2024, as concerns grew that generative AI tools could disrupt its core businesses. The recent rally suggests some of that pessimism has faded, but the upcoming quarterly results will test whether the optimism is justified.
In its fiscal third quarter, Intuit reported revenue of $8.6 billion, up 10% year over year, beating analyst expectations. Consumer revenue reached $5.3 billion, with TurboTax contributing $4.4 billion and Credit Karma $631 million. The company's small business and self-employed segment also showed resilience, though Mailchimp has continued to decelerate due to AI competition and market saturation.
For the fourth quarter, analysts project revenue of $4.27 billion, an 11.4% increase from the same period last year. That would bring full-year revenue to approximately $21.3 billion, up 13.4% year over year. Looking ahead, consensus estimates point to $23.7 billion in revenue for the next fiscal year, implying 11.1% growth.
Valuation and technical signals
Intuit's forward price-to-earnings (P/E) ratio has compressed to roughly 15.4, well below its five-year average of 33 and the broader market's multiple of 20 for the S&P 500 and 23 for the technology sector. This valuation discount reflects both the AI disruption fears and the company's slower growth relative to its historical pace.
From a technical standpoint, the stock has moved above its 50-day moving average, and the Average Directional Index (ADX) has risen to 28, its highest level since March, indicating strengthening momentum. The Relative Strength Index (RSI) is approaching overbought territory near 70, suggesting the rally may be extended in the short term.
However, the chart shows a potential rising wedge pattern, which often precedes a bearish reversal. If the stock breaks lower, it could retreat to the $300 level. Conversely, a breakout above recent highs could open the door to $400, with analysts' average price target around $449.
The broader market context is also relevant, as Nvidia's earnings and other tech results have been influencing sentiment. Intuit's report will be closely watched for any commentary on AI adoption and its impact on product demand.
Investors will also be monitoring management's guidance for the upcoming fiscal year, particularly regarding Mailchimp's trajectory and the pace of AI-driven product enhancements. The company has been integrating AI features across its portfolio, which could either mitigate or amplify disruption risks.
In summary, Intuit enters its earnings report with a mix of positive momentum and lingering concerns. The valuation appears attractive relative to history, but the technical setup is not without risk. The market will be looking for evidence that the company can sustain growth amid intensifying competition and technological shifts.
This article is for informational purposes only and does not constitute financial advice.
