Wall Street Embraces Intuit's New CEO Despite Investor Fears

(Bloomberg) -- Intuit Inc. investors may be worried about the departure of longtime Chief Executive Officer Brad Smith, but Wall Street is confident that his successor, Sasan Goodarzi, can maintain the company’s strong growth and culture.

Analysts raised their price targets after Intuit posted robust fourth-quarter results and guidance for its consumer business Thursday. The stock pared pre-market losses, climbing as much as 2.3 percent, as the market digested earnings, executive exits and new accounting rules. The next key event is the firm’s Sept. 27 analyst day, which should provide a “critical data dump,” Goldman analyst Jesse Hulsing said in a note to clients.

Wall Street Embraces Intuit's New CEO Despite Investor Fears

William Blair, Matthew Pfau

“We view the quarter’s results and fiscal 2019 guidance as very strong and in line with to above investor expectations. However, we expect shares to be under a bit of pressure on Friday given the announced CEO transition,” the analyst wrote. “Although Mr. Smith is leaving Intuit in a stronger position than the company has ever been in, there is likely still to be some investor concern, given Mr. Smith was held in very high regard by many investors.”

Positives included robust 2019 guidance for Intuit’s consumer segment and a strong end to the year for the small-business unit. The CEO’s plan to step down was the clear negative.

William Blair reaffirmed its outperform rating and does not have a price target.

Jefferies, Brent Thill

Fourth-quarter results and 2019 guidance “looked good after deciphering the noise” related to the new accounting standard, ASC606.

The shares likely dropped in post-market trading due to confusion around Intuit’s accounting disclosures, high expectations after the stock’s 35 percent rally this year, and management changes. While optically unnerving, the firm has a long track record of rotating executives through different roles as part of a multiyear succession plan.

“We are confident the newly promoted executives, who are INTU veterans, will execute a tight game plan in FY19,” the analyst said.

Jefferies reaffirmed its buy rating and raised its price target to $245 from $220.

Goldman Sachs, Jesse Hulsing

Expect the “focus to be FY19 guidance and the announcement that CEO Brad Smith will step down,” the analyst wrote. “Our biggest takeaway was management’s confidence in FY19’s tax season. The confidence stems from TurboTax Live, which the company plans to market more aggressively, and tax reform, which the company believes will drive DIY category share gains.”

Intuit’s revenue outlook was better than anticipated and EPS guidance was in line with expectations at the high end despite challenges from ASC606. The revenue forecast would’ve been much better than expected under ASC605. Consumer guidance was surprisingly good.

The company’s Sept. 27 analyst day should provide a “critical data dump,” added Hulsing, who reaffirmed Intuit’s buy rating and increased the price target to $230 from $205.

Stifel, Brad Reback

“Intuit reported an impressive 4Q print with all key financial metrics exceeding expectations” Reback wrote. “Strong, 30%+, online growth, coupled with an increasingly stable desktop business that is focused on larger customers, should enable the small business group to sustain low double-digit growth in coming years.”

The new CEO has big shoes to fill, but he’s well positioned to maintain Intuit’s strong corporate culture and its robust small-business and consumer-tax growth. The upcoming analyst day is the next catalyst, and may reveal any shifts in long-term strategy.

Stifel reaffirmed its buy rating and boosted its price target to $250 from $240.

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