At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best ...
Rattle, rattle, roll those bones! What is it with Wall Street and the gambling this week? Yesterday, we discussed Brean Murray's decision to tempt fate by slapping a buy rating on Hewlett-Packard
But as for today's featured roll of the dice, I'm not so sure. Yesterday, you see -- again, just ahead of earnings -- we saw Jefferies & Co. upgrade its opinion on Intuit
You can do it: Intuit can help
But if this is a gamble, it's a calculated one. According to Jefferies, TurboTax usage increased 10% last month in comparison to last year as investors abandoned higher-cost "human" tax preparation (what a quaint concept) in favor of do-it-yourself software packages. Illustrative of this is H&R Block's
Pretty as the TurboTax picture is, though, it's not the only basis for Jefferies' optimism. The analyst also sees the potential for a burgeoning economic recovery to lift fortunes at QuickBooks (a favorite accounting package for small businesses), and at the firm's business payments unit to boot. Last but not least, Jefferies points to "very impressive" growth at Intuit's Mint.com subsidiary.
Let's go to the tape
Sound good to you? It sure does to me; seems Intuit's firing on all cylinders these days. For that matter, Jefferies isn't doing half bad itself. Within the Software sector that Intuit inhabits, the analyst is boasting 73% accuracy on its active picks, which include:
|
Stock |
Jefferies Said: |
CAPS Rating
|
Jefferies' Picks Beating
|
|---|---|---|---|
|
Oracle |
Outperform |
**** |
31 points |
|
Microsoft |
Outperform |
*** |
20 points |
|
McAfee |
Outperform |
** |
7 points |
Suffice it to say that when Jefferies tells you Intuit's a great company, and its stock will be worth $45 within a year's time, there's good reason to listen to that argument.
Now listen closer
Problem is, the more you listen to Jefferies, the less confident it sounds in its own buy thesis. While praising the company for the unexpected "strength of the consumer tax business," the analyst also admitted that as far as the stock price goes, Intuit "isn't quite as attractive as hoped."
I agree. I mean, is business going great at Intuit? Sure it is. I put Intuit's trailing free cash flow at approximately $843 million (including the deduction of capitalized software costs), which gives the stock a price-to-free cash flow ratio of 13.7 -- right in line with analysts' projected 13.8% long-term profits growth. But here's the thing: "Right in line" does not a buy thesis make.
Foolish takeaway
And if that's the case, I have to ask: Why rush? Why buy Intuit today? To me, when a company's selling for fair value, that's a great argument for holding onto it -- but not necessarily a great reason to buy more. It's an especially bad reason to buy more right this instant, when just a few hours' patience will suffice to give you a much clearer view of where the company's headed going forward.
My advice: Sit tight. Before the week is out, you'll have Intuit's latest numbers in hand. Wall Street will then react to the news (and perhaps, overreact), at which point you'll have the whole peaceful weekend to ponder the most recent, up-to-date information possible on Intuit's condition, and decide whether it's right for you.
(At which point, do a Fool a favor: Click over to Motley Fool CAPS, and tell us what you think.)
