Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Intuit Stock Gained 33% in the First Half of 2019

By Jeremy Bowman - Jul 15, 2019 at 6:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The maker of TurboTax posted strong results through tax season.

What happened 

Shares of Intuit ( INTU -6.10% ), the company behind the popular TurboTax software, moved higher through the first six months of the year, propelled in part by a pair of strong earnings reports. The company got a boost from the new tax law as 2019 marked the first filing season since the Tax Cuts and Jobs Act was passed. According to data from S&P Global Market Intelligence, the stock was up 33% through June.  

As the chart below shows, Intuit's gains came largely at the beginning of the year on anticipation of a busy tax season, and thanks to a strong earnings report in February.

INTU Chart

INTU data by YCharts

So what 

Intuit, which also owns other business management software tools like QuickBooks, kicked off the year on a strong note as the stock rose with the broader market recovery. It added to that momentum on Feb. 22, jumping 6.8% after its fiscal second-quarter report beat expectations. Revenue was up 12% to $1.5 billion compared to expectations for $1.48 billion, while adjusted earnings per share increased 19% to $1.00, easily outpacing the forecast of $0.86. 

A 1040 tax form with a pen and a calculator

Image source: Getty Images.

The number of TurboTax units sold was flat at that point due to a delay related to the U.S. government shutdown, but data showed Intuit gaining market share, a positive sign for the upcoming quarter. Management touted the company's investment in the do-it-yourself segment with services like TurboTax Live that connect users with advisors via a live videochat.  

The stock actually slid when the company reported tax season results at the end of April: Total TurboTax units sold were up 5% for the year, and management forecast that full-year consumer group revenue would increase by 10%, which was at the high end of its prior outlook range of 9% to 10%. Though Intuit called the results "great" and said the company gained market share, investors nonetheless seemed disappointed.

However, the stock bounced back in May after the company delivered its earnings report for the full quarter that included tax season; the share price rose 6.7% on May 24. For the quarter, the company turned in revenue growth of 12% to $3.27 billion, and adjusted EPS increased 16% to $5.55, topping estimates of $5.40. The company also raised its guidance across the board. 

Now what

Intuit shares have continued to gain in July, and the company seems well positioned as the economy continues to grow, though it also offers some defensive positioning as people need tax prep and bookkeeping software even in a recession. Moreover, the company's pivot to cloud-based products should help it expand its margins, and deliver outsize growth. It's not surprising that the stock has more than tripled over the last five years as Intuit competitive advantages are getting stronger.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intuit Inc. Stock Quote
Intuit Inc.
INTU
$652.30 (-6.10%) $-42.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.