Intuit called ‘Strong Sell’ by Spruce Point, sees 40%-80% long-term downside

Spruce Point Capital Management issued a report entitled, “An Intuitively Taxing Valuation,” that outlines why the firm believes and estimates that shares of Intuit “face up to 40% – 80% potential long-term downside and market underperformance risk.” Spruce Point stated: “Long viewed as a solid, if unspectacular, grower and a solid corporate citizen, Intuit has been a beneficiary of hype surrounding artificial intelligence (AI) and currently trades at 11x NTM revenue, making it one of the most richly valued software companies. However, we have grave concerns about underlying trends in its core franchises, questionable large M&A transactions, the credibility and transparency of the Company’s accounting and financial reporting, the Company’s increasingly frequent episodes of alleged consumer-unfriendly behavior, and the sustainability of its current premium valuation.” The firm added: “However, in an attempt to be fair, we use reasonable peer company multiples for our “low” case and either Intuit’s current 11x revenue multiple or the highest valued peer company as the “high” case. However, even using these assumptions, which we believe are generous, we see 21%-79% long-term potential downside risk. In addition, since some analysts reference free cash flow multiples for large, mature software companies, we perform an adjusted FCF based valuation analysis that implies 53%-74% potential downside in Intuit’s share price.”