Investors gave a thumbs-up to Intuit (NASDAQ:INTU) stock after the software company announced it will buy privately-held Mailchimp, the Atlanta-based e-mail marketing company, for $12 billion.
The deal was first hinted at in late August, with a price of $10 billion. Since then Intuit stock has been volatile, moving within a $20 per share range. It will open today at around $573, up nearly 7% over the last month.
Intuit dates from 1983. It was an accounting and tax software company that came public in 1993. Founder Scott Cook is still chairman of the executive committee, but as with Adobe (NASDAQ:ADBE), the graphics software giant now on its second generation of leadership, this is not Cook’s Intuit. It’s the creation of Sasan Goodarzi, CEO since 2019.
Mailchimp was founded in 2001. It had revenue of about $700 million in 2019. Mailchimp just began going up-market in 2019, positioning itself as an all-in-one marketing solution. It bought Reaction Commerce, an open-source e-commerce company, in 2020.
The INTU transaction is equal parts cash and stock, with $300 million in Mailchimp employee bonuses to be paid out in stock valued at $562/share. Employees will also get $200 million in restricted stock. Intuit expects the deal to add to earnings.
Mailchimp and INTU Stock
Mailchimp had always been profitable but closely held. Founder Ben Chestnut was recently estimated to be worth $2.1 billion. His estimated 50% stake looks to be worth closer to $6 billion, based on Mailchimp’s sales price. The deal will likely spur growth in Atlanta’s venture capital scene.
Intuit built its franchise around essential small business software. Marketing seems a logical extension.
The purchase is part of a growth strategy by Goodarzi, who has been at Intuit since 2004. In 2020 he bought Credit Karma, a credit check start-up, for $7.1 billion.
He also bought Mint, a personal finance services company, for $170 million. He talks about putting Intuit’s capital to work. This may not be his last deal.
Goodarzi plans to take Mailchimp global, making it part of an end-to-end solution for small business growth. Intuit is now worth more than large transaction processors like Fidelity National Information Services (NYSE:FIS) and Fiserv (NASDAQ:FISV). The market cap is slightly higher than that of Square (NASDAQ:SQ).
The New Intuit
Intuit’s deals position it for the new era of Buy Now, Pay Later, in which companies must immediately guess how credit-worthy potential customers are.
Intuit has introduced behavioral analytics to detect identity fraud. It built a contactless card reader for its GoPayment app.
Intuit has also launched an accelerator for Artificial Intelligence (AI) start-ups. It is using the technology to provide help with its tax and accounting software.
Analysts are applauding the strategy. Bank of America (NYSE:BAC) said it was sticking with its buy rating on INTU stock after the Mailchimp buy. Of 15 analysts following Intuit at Tipranks, all but one have it rated a buy. The average price target of $625/share is 10% higher than the current price.
The Bottom Line
Intuit had been an income stock for years before Goodarzi took over. The quarterly dividend tripled from 15 cents/share in 2011 to 47 cents in 2019.
The dividend has since risen to 59 cents, but Intuit is now a growth stock. The yield just .48%. Shares are up 114% over the last two years, against the average NASDAQ gain of 84%.
If you have been holding Intuit for income, you’re fortunate. If you’re an investor looking for growth, get on board. Intuit is now big enough to play in the corporate software big leagues. Goodarzi is determined not to throw away its shot.
On the date of publication, Dana Blankenhorn held a long position in BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at firstname.lastname@example.org or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.