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Brand Face-Off: H&R Block, Inc. vs. Intuit Inc.

Evaluating HRB and INTU from technical and sentiment viewpoints

by 4/15/2014 12:38:53 PM
Stocks quoted in this article:

With tax day upon us, it seems more than appropriate to make H&R Block, Inc. (NYSE:HRB) and Intuit Inc. (NASDAQ:INTU) contestants in this week's Brand Face-Off. Both stocks have hit technical turbulence in recent weeks, which has landed each of them below their year-to-date flat lines. To be specific, HRB is down 5% so far in 2014, having shed 8.6% since the start of April to trade at $27.58. Meanwhile, INTU has plunged 11.6% from its March 11 record high of $82.40 to trade at $72.85, and is now 4.5% lower on a year-to-date basis.

Daily Chart of HRB since January 2014

Daily Chart of INTU since January 2014

Over the past two weeks, while H&R Block moved south, activity in the stock's options pits has grown increasingly bearish. The equity sports a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 3.98, with puts bought to open roughly quadrupling calls. What's more, this ratio ranks in the 90th percentile of its 12-month range, meaning the recent rate of put buying, relative to call buying, is nearing annual-high levels.

Meanwhile, Intuit has seen a completely different course of action play out in its options pits, with speculators buying to open more than 12 calls for every put during the past two weeks. The resulting 10-day ISE/CBOE/PHLX call/put volume ratio of 12.48 ranks higher than all other comparable readings taken during the past year, meaning INTU option traders have chosen long calls over puts at an annual-high rate recently. It is possible that some of this heavy call activity came at the hands of short sellers hedging against a potential near-term uptick, as short interest on INTU represents more than seven sessions' worth of pent-up buying demand, at the shares' average pace of trading. Regardless of motive, however, these call players may hit the exits if INTU continues on its downward trajectory, which could apply additional pressure on the stock.

On Wall Street, H&R Block has received five "buy" or better endorsements, with not a single "hold" or worse suggestion in sight. Meanwhile, the average 12-month price target among analysts comes in at $35.63, representing expected upside of 29.2% from the shares' current price. As such, HRB could face additional technical headwinds, should bullish brokerage firms lower their ratings and/or slash their price targets. Meanwhile, the equity is failing to capitalize on an upbeat brokerage note today, after Morgan Stanley raised its price target to $35 from $33.

Intuit, on the other hand, has received a mixed bag of brokerage notes. The stock currently sports seven "strong buy" recommendations, versus eight "hold" suggestions and one "strong sell," plus the consensus 12-month price target of $77.29 denotes a slim 6.1% premium to the shares' current perch. Needless to say, there is still plenty of room for more brokerage firms to bearishly adjust their positions on INTU, which could negatively affect the shares.

All in all, both H&R Block, Inc. (NYSE:HRB) and Intuit Inc. (NASDAQ:INTU) could be in for more technical trouble in the near term, from a contrarian perspective. However, options players have priced a healthy amount of pessimism into HRB already, making it the "winner" of this week's Brand Face-Off.

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