- Credit Karma acquisition paying-off

- Q3 forecasts beaten and full year growth guidance raised

- Share price rallies nearly 3% in after-hours trading

Buying a credit scoring company just before the world plunged into economic difficulties looks like a sharp bit of business for Wall Street-listed small business accounting software firm Intuit (INTU:NASDAQ).

Credit Karma, bought in November 2020 for $7.1 billion, contributed $468 million of revenue in Intuit’s third-quarter, up 48% year-on-year thanks to consumers increasing need for personal loans and better-value credit cards as the cost of living escalates.

Credit Karma is increasingly being used as a channel for TurboTax, Intuit’s software suite that allows Americans to file personal tax returns easily from any internet-connected device, creating and broader online ecosystem.

Q3 BEATS THE STREET

Overall, Q3 (to 30 Apr) was encouraging for Intuit despite a range of economic pressures weighing on the company’s millions of small business customers. The company posted revenue of $5.6 billion, up 35%, and ahead of the company’s guidance range of 32% to 33% growth.

Wall Street consensus estimates had called for $5.5 billion in revenue.

Earnings came in at $7.65 a share, ahead of both the company’s guidance range of $7.51 to $7.57, and analyst consensus of $7.58 a share.

Intuit CEO Sasan Goodarzi said in an interview that while consumers are certainly affected by higher gas and food prices, the consumer economy nonetheless remains ‘really healthy.’

Revenue growth guidance was raised to 31% to 32%, up from the previous 26% to 28% range. ‘The numbers gave us confidence to raise guidance,’ said Goodarzi.

One of the big competitors to the UK’s Sage (SGE), Intuit’s far faster growth has seen its valuation soar to twice that of its peer at around 7.6-times forward revenues after the stock rallied nearly 3% in after-hours trading to $368.97. That compares to Sage’s 3.7-times forward revenue multiple.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account.

Issue Date: 25 May 2022