Intuit's Underperformance: A Tale of Valuation Reset and Analyst Upgrades

Alright, let's dive into the world of Intuit Inc. (INTU), the global financial technology platform that makes TurboTax, Credit Karma, QuickBooks, and Mailchimp. You might be wondering why this company, which seems to have it all, has been underperforming in recent years. Well, buckle up, because we're about to explore the fascinating world of valuation, analyst upgrades, and the rollercoaster ride that is the stock market.

First things first, let's talk about valuation. Intuit's high P/E ratio, which has been above the industry average for several years, has been a red flag for some investors. As of 2024, Intuit's P/E ratio was 58.94, compared to the industry average of around 30. This high P/E ratio reflects investors' expectations for future growth, but it also makes Intuit's stock more sensitive to changes in earnings and growth prospects. When growth expectations weren't met, Intuit's stock price took a nosedive, contributing to its underperformance.

Another factor that has impacted Intuit's valuation is its reliance on a single product, QuickBooks. While QuickBooks is a strong brand, the company's dependence on this product for a significant portion of its revenue may make it vulnerable to market changes or competitive pressures. This reliance on a single product could also impact Intuit's valuation, as investors may perceive the company as having limited growth potential.

Now, let's talk about analyst upgrades. In February 2025, Intuit reported strong financial results for the second quarter of fiscal 2025, which led to an upgrade from "Neutral" to "Buy" by JP Morgan and an increase in its price target from $760 to $714. This upgrade and price target increase reflect analysts' positive outlook on the company's fundamentals, such as its strong revenue growth projections, impressive EPS growth, and positive analyst sentiment. The average analyst rating for Intuit stock is "Buy," indicating that analysts believe the stock is likely to outperform the market over the next twelve months. Additionally, the average price target for Intuit is $721.79, which is 18.56% higher than the current price. This suggests that analysts expect the stock to appreciate in value in the near future.

So, what can we learn from all this? Well, Intuit's underperformance in recent years can be attributed to factors such as slowdown in revenue growth, volatile EPS growth, high P/E ratio, reliance on a single product, and uncertainty in the growth prospects of new products. These factors have likely influenced Intuit's valuation, making it more sensitive to changes in earnings and growth prospects. However, the recent analyst upgrades and price target increases suggest that the company's fundamentals are strong, and investors may want to consider adding Intuit to their portfolios.

In conclusion, Intuit's underperformance in recent years has been a result of valuation reset and analyst upgrades. While the company has faced challenges in revenue growth and EPS volatility, its strong fundamentals and positive analyst sentiment suggest that it is well-positioned for a comeback. As an investor, it's essential to stay informed about the company's progress and consider adding Intuit to your portfolio, given its potential for a strong comeback. However, it is crucial to conduct thorough research and consider your risk tolerance before making any investment decisions.