Posted on 03/21/2003 2:59:27 PM PST by Leroy S. Mort
PALO ALTO, Calif. (Reuters) - Shares of Intuit Inc. (INTU.O) plunged 24 percent on Friday after the maker of personal finance and small business software warned it won't meet 2003 growth targets because of weaker tax season sales.
The stock was the second biggest percentage decliner on the Nasdaq market, shaving more than $12 on the day and breaking a rise in the shares that began in early February.
On Thursday, Intuit cut its 2003 revenue forecast to a range of $1.65 billion to $1.69 billion. Just last month it had raised its revenue forecast to between $1.71 billion and $1.77 billion. Intuit also lowered its full-year pro forma earnings per share view to $1.30 to $1.35.
The Silicon Valley-based company said sales were down across the board and asserted that its retail market share for TurboTax and QuickBooks remained "steady and strong."
In a client note issued Friday, Prudential Securities analyst Bryan Keane downgraded Intuit to "hold" from "buy" due to sluggish sales of its tax and QuickBooks accounting software.
Intuit got 26 percent of its fiscal 2002 revenue from its tax business, which is focused around its No. 1 selling TurboTax software. The bulk of those sales come in the company's fiscal second and third quarters leading up to the April 15 U.S. tax filing deadline.
Keane said the Internal Revenue Service Web site, http:www.irs.gov, may be taking share from Intuit's Web paid tax service business.
That Internet site is home to the U.S. Treasury Department's free filing initiative, which offers complimentary tax preparation and electronic filing to qualified people through a partnership agreement between the Internal Revenue Service (IRS) and the Free File Alliance, a collection of tax software companies that includes Intuit and its rival H&R Block. (HRB.N)
Keane said growth of QuickBooks could be more flat this year than expected, and that new, higher-priced flavors of that bookkeeping software may prove to have been a tough sell amid the weak economic environment. He also said sales of the Intuit's payroll products may be slowing.
On other fronts, Intuit has angered some TurboTax users with an effort to curb unauthorized sharing of that software. H&R Block -- which is attempting to capitalize on the flap -- has introduced a "switcher" advertising campaign and claims to be making sales and market share gains with its rival do-it-yourself tax preparation software TaxCut.
On Friday, H&R Block shares finished 72 cents higher, or up nearly 2 percent, at $43.44 on the New York Stock Exchange.
NO 'MAJOR TRAGEDY'
"This is not like a major tragedy; they are still growing earnings 40 percent," William Blair analyst David Farina said of the Intuit warning. "It is just not as fast as they were."
"The (February) numbers were too aggressive and they fell short," Farina said.
Barrington Research analyst Eric Wanger said in a client note that, prior to Intuit's warning, he had been "concerned that management may have been over-promising near-term growth, especially in the consumer tax and QuickBooks segments."
On Friday, he maintained his "market perform" rating on the stock but took his price target to $38.70 from $53. He also stood by his fiscal 2003 profit estimate of $1.29 a share and his call for 25 percent revenue growth for fiscal 2003.
Wanger said he was reviewing his earnings model but expects to leave estimates unchanged.
"This is still a very high-quality company with excellent growth prospects," he said.
Shares of Intuit closed down $12.17 at $38.72. (With additional reporting from Cyntia Barrera Diaz in New York)
That's putting it mildly.
They sell tax preparation software? I thought that was just an add-on module to their spyware programs...
They can keep their spyware.
Now that Tax Cut is selling State programs too, next year I'm there.
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