Financial software maker Intuit scored positive notices from Wall Street analysts Tuesday for its fiscal second-quarter results and acquisition of Credit Karma. Intuit stock initially rose on the news but dipped as the broader stock market turned south.
The Mountain View, Calif.-based company late Monday posted results for the quarter ended Jan. 31 that beat Wall Street's estimates. Intuit earned an adjusted $1.16 a share on sales of $1.7 billion. Wall Street predicted Intuit earnings of $1.02 a share on sales of $1.68 billion. On a year-over-year basis, Intuit earnings rose 16% while sales climbed 13%.
Intuit, the maker of QuickBooks and TurboTax software, also announced the acquisition of Credit Karma for $7.1 billion in cash and stock. Credit Karma generated nearly $1 billion in revenue in 2019, up 20% from the prior year.
Best known for pioneering free credit scores, Credit Karma provides its members with a host of free services related to their financial goals. Those services include identity monitoring, applying for credit cards, and shopping for loans and high-yield savings accounts. Credit Karma has 106 million members in the U.S., U.K. and Canada. It has 37 million monthly active users.
Credit Karma Called 'Great Strategic Fit' For Intuit
Intuit expects the Credit Karma acquisition to close in the second half of 2020. It is the largest acquisition in Intuit's history.
"By joining forces with Credit Karma, we can create a personalized financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they've always dreamed about, pay for education and take the vacation they've always wanted," Intuit Chief Executive Sasan Goodarzi said in a news release.
Jefferies analyst Brent Thill called Credit Karma a "great strategic fit" for Intuit as it grows its consumer business.
Thill reiterated his buy rating on Intuit stock and raised his price target to 330 from 320.
Intuit Stock Briefly Back In Buy Zone
On the stock market today, Intuit stock fell 0.6% to 284.80. At the market open, Intuit stock jumped back into the buy zone of its recent breakout. In intraday trading, it surged as much as 5.3% to 301.64. It later reversed to a modest loss as the overall market swooned.
On Feb. 5, Intuit stock broke out of a cup-with-handle base at a buy point of 293.10, according to IBD MarketSmith charts. It fell out of the 5% chase zone on Monday amid a broad market sell-off related to the growing Covid-19 coronavirus outbreak. However, Intuit stock found support at its 50-day moving average line. It closed above that mark on Tuesday too.
Guggenheim analyst Ken Wong maintained his buy rating on Intuit stock and upped his price target to 330 from 320.
"We are incrementally positive on Intuit's acquisition of Credit Karma and think the deal will create new consumer finance growth opportunities from tax filing through financial planning," Wong said in a note to clients.
Intuit Guidance Mixed For Current Quarter
Intuit gave mixed guidance for the current fiscal third quarter but maintained its outlook for the full year.
For the current quarter ending April 30, Intuit expects to earn an adjusted $5.90 to $5.95 a share. That is below Wall Street's expectations for $6.18. It guided ahead of views on revenue. It expects to generate sales of 3.61 billion vs. analyst estimates of $3.59 billion.
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