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|Intuit Inc. |(INTU - NASDAQ) |$176.66 |

Note: All changes since the last report are highlighted.

Reason for Report: Estimate Revision

Prev. Ed.: March 8, 2018; 2Q18 Earnings Update

Firms’ Recommendations: Neutral: 46.7% (7 firms); Positive: 46.7% (7); Negative: 6.7% (1) Prev. Ed: 8; 7; 2

Firms’ Target Price: $172.73 (↓$1.44 from last edition; 11 firms) Firms’ Avg. Expected Return: (2.2%)

Note: Although dated Mar 21, 2018, tables are as of Feb 27, 2018.

Note: The tables below (Revenues, Margins and Earnings per Share) contain material from fewer brokers than in the Valuation table. The extra figures in the Valuation table are taken from reports that did not have accompanying spreadsheet model.

Portfolio Manager Executive Summary

Intuit Inc. (INTU), headquartered in Mountain View, CA, provides business and financial management solutions to small and medium-sized businesses, financial institutions, and accounting professionals in the United States and internationally. It offers QuickBooks accounting, TurboTax and business management software for small businesses. Further, it offers various consumer tax return preparation products and services.

Key factors for evaluating an investment strategy for Intuit are as follows:

1. Intuit boasts better earnings growth potential compared to its peers in software and the acquisitions by the company could benefit its small business accounting and Payroll and Payments offerings.

2. Intuit is an attractive stock, given its valuation, solid sales and EPS growth, management team, and growth initiatives.

Competitive Position: In the payroll business, Intuit competes with Automatic Data Processing, Inc., and Paychex. Wells Fargo, JP Morgan Chase, and Bank of America. Payment processors such as First Data Corporation, Elavon, Global Payments, and FIS-Certegy pose stiff competition for Intuit in the merchant services business.

Firms’ Opinions: Of the total firms covering the stock, 46.7% were positive, 46.7% were neutral and 6.7% had a negative outlook. The target price ranges between $145 and $200, with the average being $172.73. On an average, the firms expect a return of (2.2%) from the stock based on the current price.

Bullish (Buy or equivalent outlook) – 7 firms or 46.7% – Overall, these bullish firms believe that Intuit is well positioned to gain market share (in core businesses), given its valuation, strong management team and increasing growth initiatives. They are also impressed with growth in the Tax segment, which they expect to be accretive in the tax season. The Small and Medium Business (SMB) segment also has significant opportunities for growth. These firms are particularly optimistic about the less competitive environment that Quickbooks Online (QBO) will experience on expanding into the self employed and international markets. The firms also believe that the newly enacted Tax Cuts and Jobs Act will lower the company’s effective tax rate, thereby boosting the bottom-line results going forward.

Cautious (Neutral or equivalent outlook) – 7 firms or 46.7% – The firms with a neutral outlook prefer remaining on the sidelines as they are apprehensive about the performance of the online ecosystem, which might not experience massive gains. However, they are positive about the Consumer Tax Business’ growth despite a slow start to the Tax season. Moreover, few firms see a positive impact on the company’s near-term bottom-line results mainly benefiting from lower effective tax rate as a result of enactment of Tax Cuts and Jobs Act.

Bearish (Sell or equivalent outlook) – 1 firm or 6.7% – These firms are concerned about the tax business becoming more expensive and eventually weighing on the company’s strategy of winning market share via the sales of low priced QBO units. The shift toward the low margin subscribers which is expected to continue for the next few quarters might be a drag on the margins. Moreover, a slow start of the tax season have made firms cautious about the company’s near-term performance.

Long-Term Outlook: The company’s future growth depends on its ability to increase its installed base against the backdrop of increasing competition for SMB customers. Intuit has a tradition of successful “customer-driven” invention. This tradition has enabled management to build a strong portfolio of businesses dedicated to the varied needs of customers.

Mar 21, 2018

Overview

Key investment considerations as identified by the firms are as follows:

|Key Positive Arguments |Key Negative Arguments |

|The company has a dominant market share in the Small and Medium Business |Intuit expects margins to be under pressure going forward due to an |

|(SMB) market, with its tax accounting software. |increase in R&D expense. |

|Its revenues continue to accelerate, led by QuickBooks and TurboTax. |It is expected that H&R Block will intensify competition by acquiring |

|The company, especially the Business vertical, is expected to benefit from|tax software clients. |

|an improvement in the economy and associated levels of IT spending. |A decision by the Internal Revenue Service (IRS) to offer free, |

|Intuit continues to buy back shares, which is expected to boost its EPS |web-based e-filing to taxpayers could harm Intuit’s consumer tax |

|and generate solid FCF. |franchise. |

| |The increased traction from free tax preparation software offerings |

| |could reduce the price potential of TurboTax. |

The company realigned its business units effective Aug 1, 2013 and completed the divestiture of its Financial Services and Health Group.

Headquartered in Mountain View, CA, Intuit Inc. is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers, and accounting professionals in the United States and internationally. With approximately 8,200 employees as of Jul 31, 2017, the company has major offices in the United States, Canada, India, U.K., Singapore, Australia, and other locations.

However, the company generates over 95% of revenues from U.S operations. In fiscal 2017, the company had generated total revenues of $5.177 billion. The company has three reportable segments: Small Business, Consumer Tax and ProConnect. For more information on the company, visit its website at .

Note: INTU’s fiscal year ends on Jul 31.

Mar 21, 2018

Long-Term Growth

Intuit is primarily focusing on acquiring customers, growing revenues faster than expenses, reducing expenses, if needed, as well as continuing to invest in business growth opportunities and looking for attractive merger and acquisition (M&A) opportunities.

The company’s future growth depends on its ability to increase its installed base amid increasing competition for SMB customers. The company faces fierce competition in both the major markets (accounting and tax) that it operates in. In the smaller tax software segment (TurboTax), the company is expected to face increased competition from H&R Block as the company pursues new and existing tax software users, with an aggressive marketing campaign and new product offerings. The firms believe that INTU will use its momentum in the QuickBooks segment to concentrate on offering ‘service’ options and will enhance features of its existing software. The company plans to spend heavily on marketing, sales, and research and development (R&D) in order to continually improve (and find ways to improve) its existing products for ease of use, value, and simplicity. The firms also believe that a vast majority of Intuit users are loyal, and thereby, do not predict a major migration to competing products.

Intuit’s Growth Strategy

Intuit has a tradition of successful “customer-driven” invention. This enables management to build a strong portfolio of businesses that are dedicated to a variety of customer needs. Management also indicated that it might make acquisitions to further monetize its substantial customer base in tax and SBA, going forward. By applying strategic and operating rigor to this foundation, the company will be able to deliver solid revenues and profit growth.

Key fundamentals that support the stock’s growth strategies are as follows:

Focus on products: The company is focusing on reimaging its products with new mobile design. The TurboTax solutions help customers to prepare and file online tax returns via tablet, mobile phone or desktop computer. These new offerings are expected to increase its customer base going forward.

Creating network effect platforms: The company is moving to additional open platforms with application programming interfaces that help to solve problems faster and thereby increase its customer base.

Leveraging data for customers' benefit: The company helps customers to make better decisions and improves transactions and interactions by providing improved products.

Adjustments in Business Portfolio: The company is primarily focused on small businesses, consumer and professional tax, and accountants. It targets businesses with large, underserved market opportunities where management believes it has a strategic and durable advantage to generate long-term profitable growth. The company made a number of acquisitions and divestitures in the past several years to adjust its business portfolio so that it remains consistently on its focus areas.

Efforts to meet customers’ requirements: The company actively applies its core competence of customer-driven invention to solve user problems with simple and easy-to-use solutions. There is a secular shift to digital services, which are driving customer acquisition and revenue growth across Intuit’s businesses. Management believes that it has the required strategy to continue increasing its share in the digital services market.

For the last two years, Intuit is striving to shift its business model from selling software to cloud-based subscription providers. Cloud-based solutions, as against software-based ones, are widely popular as they offer anywhere, anytime access. Cloud is a flourishing part of the technology space and has been gaining momentum in recent years. It is a process by which data or software is stored outside of a computer and is accessible from anywhere any time via the Internet. This revolutionary idea can lower IT costs of companies by cutting down the need for servers and staff. According to a study by non-profit association CompTIA released in Sep 2016, over 90% of the companies surveyed utilized some form of cloud computing. Of these, only 6% have been using such solutions for five years. In contrast, 23% of the companies have been utilizing Cloud for a period of less than a year. This indicates that the market has huge growth potential. According to Gartner, Software-as-a-Service (SaaS) spending is estimated to increase at a four-year compound annual growth rate (CAGR) (2016–2020) of 37%. With its SaaS-based QuickBooks and Online Tax applications, the firms think that Intuit is well-positioned to lead the market.

Mar 21, 2018

Target Price/Valuation

Provided below is a summary of valuations and ratings as compiled by Zacks Research Digest:

|Rating Distribution |

|Positive |46.7%↓ |

|Neutral |46.7%↑ |

|Negative |6.7%↓ |

|Max. Target Price |$200.00 |

|Min. Target Price |$145.00 |

|Avg. Target Price |$172.73↓ |

|No. of firms with Target Price/ Total |11/15 |

Risks to Intuit’s target price include a material slowdown in the long-term growth rates of either consumer tax or small business units. The firms believe that the current market environment has been challenging for enterprise software vendors; particularly those selling to SMBs, and this end market could remain difficult.

Recent Events

On Feb 22, 2018, Intuit announced 2Q18 results. Highlights are as follows:

▪ Intuit reported revenues of $1165 million, up 15% from the year-ago quarter.

▪ The company reported non-GAAP income per share from continuous operations of 35 cents compared with 26 cents reported in the year-ago quarter.

Revenues

Per the 2Q18 press release, Intuit reported revenues of $1165 million, which was within the guided range of $1160-$1180 million. On a y/y basis, revenues were up around 15% primarily owing to stellar performance of TurboTax and QuickBooks Online. Services and Other revenues were up nearly 18.4% to $849 million while product revenues increased 5.7% to $316 million.

Provided below is a summary of revenues as compiled by Zacks Digest:

|Revenues ($ in Million) |2Q17A |

|Copy Editor | |

|Content Ed. |Anirudha Bhagat |

|QCA |Aniruddha Ganguly |

|Lead Analyst |Anirudha Bhagat |

|Reason for Update |Estimate Revision |

| | |

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March 21, 2018

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