This 'defensive' software stock could jump 70% going forward, Mizuho predicts

Published Wed, Nov 30 20221:19 PM EST

Investors should consider buying Intuit heading into 2023 as a defensive way of gaining exposure to the software sector, according to Mizuho. Analyst Siti Panigrahi reiterated a buy rating on Intuit after the company reported its latest quarterly results. The analyst said the company is set up to beat expectations next year after de-risking guidance for its Credit Karma and Small Business verticals. "Intuit de-risked Credit Karma by significantly lowering FY23 CK guidance to (15)% - (10)% Y/Y growth, while maintaining FY23 bottom-line, reflecting the resilience and flexibility of Intuit's business model. With FQ1 outperformance, small business growth now implies only 14% Y/Y for the remainder of FY23, which further derisked that segment," Panigrahi wrote in a Wednesday note. "Therefore, we expect Intuit to comfortably beat and raise through FY23, supported by defensive revenues (~75% of FY22 total) primarily from tax and QBO subscriptions," Panigrahi added. The analyst has a price target of $650 per share, implying upside of roughly 71% from Tuesday's close. Intuit beat expectations in its most recent quarter after reporting earnings of $1.66 per share on revenue of $2.6 billion. Analysts were expecting earnings of $1.19 per share on revenue of $2.5 billion, according to consensus estimates from StreetAccount. The company also lowered its fiscal 2023 guidance. The analyst said the conservative guidance for Credit Karma was encouraging, given that it assumes a "significant deterioration" in unemployment and consumer default rates, according to the note. The 2023 guidance for Intuit's Small Business vertical is similarly "achievable," especially as the the business outperformed in the most recent quarter, according to the note. "With CK and SMB de-risked, strong cash flows, and consistent shareholder returns, we consider Intuit the most defensive software name heading into calendar 2023, particularly trading at 27x P/E, down from ~50x. We reiterate our Buy rating and $650 PT," Panigrahi wrote. —CNBC's Michael Bloom contributed to this report.