Investing.com -- HSBC has raised its rating on Intuit (NASDAQ:INTU) to Buy from Hold, a move driven by the company’s compelling valuation and limited exposure to tariff woes.
The financial software maker’s shares rose more than 2% in premarket trading Wednesday.
The bank maintained its $699 price target on the stock, which implies around 20% upside from the last closing price.
Intuit is currently valued at 23x its projected non-GAAP earnings per share (EPS) for calendar year 2026 (CY26), compared to a sector median valuation of 22.2x earnings.
HSBC analysts believe the broader sector is oversold, with the median upside to its target prices standing at 37%.
“Moreover, the sector appears to have broadly sold off due to concerns about the tariff disruption; however, Intuit is somewhat insulated as it derives 90% of its revenue from the U.S.,” analysts led by Stephen Bersey said in a note.
They forecast a 17.2% earnings per share (EPS) compound annual growth rate (CAGR) from 2024 to 2027, outpacing the sector’s 10–15% range.
Intuit’s push into the mid-market space is showing traction, with online revenue from QuickBooks Advanced and Intuit Enterprise Suite up 40% year-over-year in Q2 FY25, analysts noted.
They believe the mid-market subsegment remains largely untapped and offers “a long runway for growth.” Intuit’s internal estimates suggest that the total addressable market for both small and mid-market segments stands at $90 billion each.
Operating performance also looks robust. HSBC expects a fiscal year 2025 (FY25) non-GAAP operating margin of 40.1%, slightly above management's guidance of 39.9%.
AI-driven efficiencies have contributed to more than $90 million in annualized savings during the first half of FY25. Non-GAAP EPS is projected at $19.97, compared to the company’s own forecast of $19.26.
Meanwhile, the outlook for Intuit’s Consumer segment is more cautious. HSBC projects FY25 revenue growth of just 4.4%, falling short of the company’s 7–8% target.
The bank remains cautious on Intuit's assisted tax filing segment, noting revenue grew just 0.9% year-over-year in the first half of fiscal 2025. It expects greater clarity with third-quarter results, when most of the segment’s revenue is typically recognized.
HSBC also flagged potential risks from DOGE initiatives that could introduce a free tax filing app.
This content was originally published on Investing.com
