In a complete shift from my usual introduction, I’m just going to get into the brass tacks: nearly every publicly traded company for the near term is a sell. Of course, some exceptions exist but I don’t think that’s necessarily the case for Intuit (NASDAQ:INTU). Nevertheless, I give a slight caveat because INTU stock presents an interesting case, given the present turmoil.
According to a recent assessment by Bank of America (NYSE:BAC), this country is already in a recession, labeling the deterioration as a “deep plunge.” In a note, BofA economist Michelle Meyer wrote that, “Jobs will be lost, wealth will be destroyed and confidence depressed.” Obviously, you don’t need an esteemed expert to tell you this. Just go outside — if you can. City after major city, the American empire is starting to look like a ghost town.
Yet in this upheaval, the federal government is requiring its citizens to comply with basic protocol. For many individuals and especially business owners, that means paying taxes. Now the good news for those who owe Uncle Sam money this year is that Washington has heard your pleas. A few days ago, the IRS announced on its website that tax payments can be extended to July 15, 2020.
Significantly for independent contractors and gig workers, this relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. However, please bear in mind that tax payments are extended but not the filing, which is still due mid-April.
On paper, you’d think that this is a net positive for INTU stock. With so much disruption, people need whatever help they can get, and Intuit is useful here.
Benefit to INTU Stock is Probably Priced in
However, my biggest concern for INTU stock is that whatever enthusiasm there is for shares is likely priced in. For instance, many entrepreneurs have complicated tax returns which involve longer planning. Therefore, whatever revenue Intuit has generated is pretty much it.
Additionally, those with such complicated returns may outsource their troubles to organizations like H&R Block (NYSE:HRB). By the way, HRB shares have also been hurt badly, down 37.2% in the last 30 days, compared to INTU stock’s 32.2% decline and the S&P 500 index’s 27.8% drop.
For INTU stock, a missed opportunity — of which Intuit has no control over — hurts the upside potential. In my opinion, the better move by the federal government would be to extend that tax filing deadline by at least a month. Sure, it would cause a bottleneck but my goodness! The U.S. is facing an unprecedented crisis. That extra time can help settle nerves and reduce stress for taxpayers.
Granted, some may counter that because Washington gave only half-relief (a monetary benefit, not a time-related one), people that were anticipated the filing deadline to be pushed back could rush into purchasing Intuit services. Certainly, I concede this as a possibility.
Furthermore, the State of California has ordered all residents to stay home “until further notice.” Exceptions are given for essential services, such as grocery or pharmacy shopping. Given the immediate nature of this announcement, I’m not sure what this entails for important but not necessarily essential services like tax and accounting services.
So yes, a clamp down on your accountant’s office would certainly make INTU stock a bit more attractive. How much more is the question.
Whatever advantage that Intuit has over other accounting services is largely a moot point. Let me put it this way: people are freaking out. While it’s not helpful, I also don’t blame them.
An Awful Cloud Hangs Over Everything
At this time, businesses that are not normally conducted online are shutting down everything to core essentials. Frankly, that might involve cutting back on accounting software. Yes, such software may help with convoluted taxes, but you know what? Nowadays, people have nothing but time.
Further, this breaking news of all of California staying home will have long-term repercussions. Love it or hate it, it is America’s economic engine. On its own, it would have the fifth-largest economy in the world. Thus, this news isn’t just a ripple effect for the U.S. It will impact the international community.
Does INTU stock have an interesting case. Yes, it’s possible it might see some benefit. But the seismic events that have occurred — and keep getting worse — suggests that this too is a sell.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.