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Intuit (Intuit (INTU)) had a rough Thursday. The company reported fiscal third-quarter results that actually beat expectations, but that wasn't what the market cared about. Instead, investors focused on a 17% workforce reduction, a warning about weakening tax filing trends, and a softer-than-expected outlook. The stock fell 20.38% to $305.68, hitting a new 52-week low.
Let's start with the bad news, because there's a lot of it.
CEO Sasan Goodarzi said total IRS filers are expected to decline about 30 basis points this season, representing an industry-wide contraction of roughly 2 million filings since the post-COVID period. That's a shrinking pie for everyone, including Intuit.
TurboTax online units are expected to decline about 2%, while pay-nothing customers fell to 7 million from 8 million. Goodarzi was blunt about why: "we lost on price" among the most price-sensitive DIY filers earning less than $50,000 annually. That's a tough admission for a company that dominates the tax-prep market.
Management said the company plans to "evolve our business model" as customers increasingly spend more on tax and accounting experts than software alone. Intuit plans to launch an expanded lineup of AI-driven expert platforms in August. So the strategy is to lean into human-assisted tax prep, even as the DIY base shrinks.
In a vacuum, the Q3 numbers were solid. Revenue came in at $8.56 billion, topping estimates of $8.53 billion. Adjusted earnings were $12.80 per share, above the $12.28 estimate. Total revenue rose 10% year-over-year, driven by 15% growth in Global Business Solutions, 8% growth in Consumer revenue, and 19% growth in Online Ecosystem revenue.
For the full year, Intuit expects revenue of $21.34 billion to $21.37 billion, above estimates of $21.23 billion, and raised adjusted EPS guidance to $23.80-$23.85 from $22.98-$23.18, versus estimates of $23.20. So the business is still growing, just not in the way investors wanted.
Intuit plans to reduce its workforce by about 17% to simplify operations and streamline parts of its engineering and product teams, including Mailchimp-related investments. The company expects restructuring charges of about $300 million to $340 million, largely in the fourth quarter.
On the bright side, the board approved a new $8 billion share repurchase authorization. That's a big number and signals confidence, even if the market isn't feeling it today.
CFO Sandeep Aujla said the company expects to deliver more than $25 billion in refunds this year through its Fast Money offerings. That's a reminder that Intuit still processes a massive amount of tax refunds, even if the growth story is shifting.
The stock has been in a downward trend and continues to trade below key short- and long-term moving averages. The relative strength index (RSI) is 45.08, indicating neutral momentum — not oversold yet, but not overbought either.
Key resistance is at $393.00, which aligns with the 20-day simple moving average. That's been a barrier for upward moves. Key support is at $342.11, the 52-week low before today. Well, that level is now broken, so the next support might be anyone's guess.
Despite the sell-off, the stock carries a Buy rating with an average price target of $693.63. That's more than double the current price, which shows how much the stock has fallen. Recent analyst moves include:
So analysts are still bullish, but they're cutting price targets as the stock slides. The gap between the average target and the current price is enormous, which could mean either the stock is deeply undervalued or the analysts haven't fully adjusted to the new reality.
For now, Intuit is a company with a strong core business, a shrinking DIY tax customer base, a big restructuring plan, and a stock that's getting hammered. The next few quarters will show whether the AI-driven expert platform bet pays off.
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