Is now the time to sell INTU?
Intuit Inc. (NASDAQ: INTU) just announced that its senior leadership team plans to release its second-quarter report after the close on Thursday, Feb. 24. Wall Street analysts are anticipating a rise in earnings to $1.88 per share, up from $1.53 per share reported during its last quarter.
INTU has seen a mostly positive post-earnings reaction during the past two years, posting higher returns after five of these sessions, and averaging a next-day swing of 2.7%, regardless of direction. This includes a 10.1% pop seen after its last report in November.
The stock staged a sharp bounce off its 260-day moving average last week, though the $565 level, which also rejected INTU's Jan. 20 rally, is once again moving in as a ceiling. The stock was last seen down 0.8% to trade at $556.68, though it boasts a year-over-year lead of 45%.
Analysts seem to like INTU ahead of earnings, too. Just yesterday, BMO initiated coverage with an "outperform" rating, and a price target of $625. Plus, 14 of the 18 in coverage call the stock a "strong buy," and the 12-month consensus price target of $715.10 is a 28.3% premium to current levels.
From a fundamental point of view, Intuit has generated strong and consistent top- and bottom- line growth in recent years, growing its revenues and net income both by 73% since fiscal 2018. The fintech company is also estimated to see a 15.4% increase in revenues and a 16.75% increase in earnings in fiscal 2023. Furthermore, Intuit boasts a decent balance sheet with $3.25 billion in cash and $2.51 billion in total debt.
However, with a market cap of $157.46 billion, INTU’s biggest issue is its valuation. The stock trades at an extremely high price-earnings ratio of 73.43 and an inflated price-sales ratio of 13.58, pricing in multiple years of continued growth. In general, INTU is simply not a fair value at its current price, even with its forward price-earnings ratio of 43.29 indicating a big improvement.