As far as exciting investments go, financial software giant Intuit (INTU) – best known for TurboTax and QuickBooks – probably ranks near dead last. Fortunately, the fact that relatively few people are looking at the company opens upside opportunities because it’s surprisingly relevant to post-pandemic work paradigms. I am bullish on INTU stock.
For young people just entering the workforce, the concept of tax season may initially sound daunting. Undoubtedly, then, more than a handful have curiously wandered onto the website for Intuit’s TurboTax, which proudly promotes free tax-return services. How can such a solution for a mentally draining process be free?
Of course, the answer arrives in the fine print: Intuit will do your taxes for free but only if they are simple. By simple, the company means income recorded on Form W-2 and/or limited interest and dividend income reported on a 1099-INT or 1099-DIV form.
What’s not included? Itemized deductions, unemployment income, reported on a 1099-G, and most significantly, business or 1099-NEC income. In other words, if you own a company or operate as an independent contractor (colloquially known as a gig worker), you can request Intuit’s services, but it will cost you.
As circumstances currently stand with the grand work-from-home experiment, employees are simultaneously enjoying the lifestyle of the gig worker while also filling out relatively simple W-2 forms every April 15.
However, this fantasy-land arrangement may soon come to an end, which cynically bodes well for INTU stock.
Intuit’s Smart Score Rating
On TipRanks, INTU scores a 7 out of 10 Smart Score rating. This indicates the potential for the stock to slightly outperform the broader market, going forward.
The Wake-Up Call That Should Lift INTU Stock
From the morning commute to irksome coworkers, even the best-compensated office jobs had their challenges. Therefore, when the COVID-19 pandemic forced companies to experiment with telecommuting platforms, it wasn’t difficult to anticipate that most employees preferred their newfound work arrangements.
Understandably, as an increasing number of companies are recalling their employees, worker bees are putting up a fuss, in many cases threatening to quit altogether. Although some businesses are consenting for now, eventually, the narrative may pivot in favor of employers.
Primarily, companies aren’t ignorant. According to the American Management Association, the average worker admitted to wasting more than two hours a day, not counting lunch. Undoubtedly, employers are taking the claim that workers are more productive at home than in the office with a huge grain of salt.
Frankly, if people are wasting two hours daily at work, it seems incredulous that they will be more productive with zero accountability or supervision.
Therefore, employers will eventually play hardball with their workers. Should employees quit as they previously threatened, their logical avenue will be to join the gig economy. This way, as independent contractors, they can set their own hours and their own work environment.
However, taxes for gig workers are much more complicated than W-2 employees’ taxes, which then bolsters the narrative for INTU stock.
A Widening Addressable Market
In May 2019 – before the pandemic – Mastercard (MA) projected that the gig economy would grow to $455 billion by the end of 2023 in gross volume transactions. Essentially, this dynamic suggests that much of the assumptions about Intuit’s growth are based on pre-pandemic norms.
However, moving forward, it’s possible that – given how much workers prefer telecommuting – the gig economy could expand at a much higher rate than previously forecasted. Basically, the total addressable market for Intuit will increase, thus logically benefiting INTU stock.
Further, evidence shows that rising inflation is boosting the number of people turning to gig work to help mitigate rising prices. In other words, the more people enter the gig economy, the more complex their tax returns will be, thereby driving up demand for Intuit’s tax-prep software and, eventually, spiking up the price for INTU stock (potentially).
Not only that, independent contractors must keep records of their income, transactions, and deductions in case the IRS has questions or, heaven forbid, selects their returns for audits. That would help improve Intuit’s QuickBooks software sales, adding more relevance for INTU stock.
Wall Street’s Take on INTU Stock
Turning to Wall Street, INTU stock comes in as a Strong Buy, based on 15 unanimous Buys. The average Intuit price target is $531.43, implying 32% upside potential.
Conclusion – Intuit Could be Undervalued
Finally, investors may want to consider how legitimately undervalued INTU stock is. The underlying company features solid strength in its balance sheet along with excellent profitability metrics.
A highlight includes Intuit’s net margin of 19.4%, which is far higher than software industry norms. Further, the company posted revenue of $5.63 billion in the quarter ending April 30, 2022, up 35% year-over-year.
Combine that with an expanding total addressable market of employees becoming gig workers, and Intuit starts to make sense as a long-term bullish idea. While INTU stock has suffered sharp losses this year, the bears may have gone too overboard with their negativity, considering the compelling fundamentals.
