Morgan Stanley Downgrades Intuit (INTU) to Underweight
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(Updated - September 13, 2016 11:07 AM EDT)
Morgan Stanley downgraded Intuit (NASDAQ: INTU) from Equalweight to Underweight with a price target of $105 (unchanged). With a 24x CY17 P/E multiple, analyst Keith Weiss sees valuation as full, and he rates the stock Underweight given his price target.
"With our Base case pointing to 34% operating margins in FY17e, we think management's margin guidance of 33-34% and consensus of 34% are achievable. The change to 3-year revenue recognition for QuickBooks Desktop (QBDT) in FY15 provides a key source of margin expansion in FY17e and in FY18e. However, margin expansion beyond FY18e likely proves difficult as a growing mix of Small Business revenue versus the higher margin Tax business offsets the tailwind of steadily improving Small Business segment margins," said Weiss.
The analyst added, "Using our current QuickBooks Online (QBO) subscriber forecast, our Base Case analysis suggests that Intuit operating margins hit a ceiling at ~35% post FY18e thru FY21e. With limited room for margin expansion, we forecast a mid-teens earnings growth profile for INTU over the next several years. While a durable subscriber base deserves a premium, at 24X CY17e PE, current multiples reflect this – limiting upside from current levels, in our view."
Shares of Intuit closed at $109.54 yesterday.
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