Wait for a pullback on Intuit, says Barry Schwartz

The stock was a leader in 2021 but that’s maybe part of the problem for investors looking at US fintech name Intuit Inc (Intuit Inc Stock Quote, Charts, News, Analysts, Financials NASDAQ:INTU). For portfolio manager Barry Schwartz of Baskin Wealth Management, getting in on the stock may require a pullback but Intuit’s strength in the SMB sector cannot be denied.

“Intuit owns accounting software and it just bought a company called Credit Karma. It sells a lot of products and services for small businesses to run their back office and to run their payments and accounting. It’s just a terrific business,” said Schwartz, chief investment officer at Baskin, who spoke on BNN Bloomberg on Tuesday.

“It was one of the best performing stocks [in 2021], a large cap that last year was up  about 70 per cent, just shocking,” he said.

Intuit has started the year off on a bum note, with the stock dropping about six per cent so far this week. That comes after a great couple of years where INTU returned 144 per cent over 2020 and 2021. The company, which has a number of well-known products starting with TurboTax and QuickBooks, made some big moves in recent month in acquiring both automated marketing platform Mailchimp and credit and financial management name Credit Karma. Intuit, with a market cap of $175 billion, bought Mailchimp in November 2021 for $12 billion and Credit Karma in December of 2020 for $8.1 billion.

Intuit has said the acquisition of Credit Karma, which has free offerings for personal financial management and tax preparation, added 110 million new fleet of customers and broaden the company’s offerings.

“We’re thrilled to begin our journey together to create a mobile, personal financial assistant for consumers to help solve their most pressing financial problems,” said Sasan Goodarzi, CEO of Intuit, in a press release. “Together, we will help consumers achieve financial success with confidence by helping them find the right financial products, put more money in their pockets, and provide financial expertise and advice. 

Shares of Intuit jumped after the company’s fiscal 2022 first quarter results were delivered in mid-November, which featured 52 per cent year-over-year growth in revenue to $2.007 billion, a number which included the addition of Credit Karma. EPS was up a smaller nine per cent to $0.82 per share. Analysts had been expected $1.81 billion in revenue and earnings of $0.99 per share.

Intuit says the two big acquisitions fit with its strategic goals, dubbed the company’s “five big bets” for growth, which aim to make Intuit an “AI-driven expert platform.”

“We are off to a strong start in fiscal year 2022, delivering on our strategy of becoming an AI-driven expert platform powering the prosperity of consumers and small businesses,” said Goodarzi in a November 18 press release. “We continue to see strong momentum and proof that our Big Bets are further positioning us for durable growth in the future, and we’re delighted that Mailchimp has joined Intuit.”

Even though the stock has stalled in recent months, Schwartz says investors might want to wait for more of a dip to dive into Intuit.

“It’s probably now trading at like an eye-popping model multiple but this is what happens when the market starts to crowd into names that consistently year in, year out have terrific organic revenue growth and earnings growth,” Schwartz said. “Unfortunately, we’ve never spent a lot of time on the name so we totally missed that one. But the market loves mission-critical-type businesses and this is one of them.”

“It really has no competition, no alternative, so I probably would look at it if there was a serious pullback on the name,” he said. “But if there’s a serious pullback on the name there’s probably going to be a serious pullback on other high-quality growth names and so you’d have the pick of the litter, so to speak.”

Intuit has another fan in CNBC’s Jim Cramer who recently put his money on the stock to deliver a repeat performance. 

“The stock was up nearly 70 per cent last year and I wouldn’t be surprised at all if we could have another monster year in 2022,” said Cramer, host of Mad Money, on CNBC on Tuesday. “I’m so impressed with Intuit every time I see them come on air. I very much believe in their takeover strategy, which included the recent purchase of Credit Karma and now MailChimp even though both companies are really stupid names, extending the reach into small business and making the company even more indispensable.”

“As a small business owner myself, I don’t know what to do without these guys. They’re a way to stay organized and to keep costs down. That’s what they really do,” he said. “I really admire Intuit and its management, always have, which is why I’ve been pushing the stock for years. I am not daunted by the current decline. It’s now more than 100 points from its high evenness business going gangbusters that appeals to me.”