Intuit stock falls on Q4 guidance, drop in TurboTax free users

Intuit (INTU), the company behind TurboTax and Credit Karma, reported fiscal third quarter results that topped Wall Street estimates on both the top and bottom lines.

For the full year, Intuit raised its revenue forecast and issued better-than-expected earnings guidance. However, its earnings outlook for the fourth quarter fell short of analyst expectations, with the company expecting adjusted earnings per share of $1.80 to $1.85 versus an estimate of $1.93.

Intuit also reported that its TurboTax unit lost about one million free users, which raises concerns about what increased competition for those users could mean for the company.

In the video above, Yahoo Finance's Brad Smith and Seana Smith discuss Intuit's latest quarterly report.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video transcript

All right, let's take a look at into a shifting gears just a bit.

The company missing Wall Street expectations for its fourth quarter profit forecast, also, though, raising its full year revenue outlook, although not enough for the street, and you're looking at losses of just about 6%.

Digging into this report just a bit.

A couple of key things I wanted to highlight here, Brad.

When it comes to the CEO of its credit karma business, they will be retiring at the end of the year.

So an executive change something that analysts are making note of here this morning and then also, when it comes to TurboTax, they higher price TurboTax clients that did help boost sales during the tax season.

But the company did see a decline in the lower end customers.

Barclays calling it out in their, uh, quick reaction to this print and that competition for these lower paying and free customers raises some questions that could concern investors here down the line.

So I think that's one of the reasons, in addition to that, guidance falling just a bit shorter, not at least not enough to excite the street.

One of the reasons why we're seeing that stock under pressure here this morning.

I mean, it's a $35 billion market total addressable market that they were talking about on the earnings call last night and for TurboTax.

I mean, they have been a household name for decades when it comes to filing your taxes.

But coming back to your point here, it really does boil down to where some of those core users, even over the years, are saying, Wait a minute and I can get this done for free, either by the government in some cases, or just finding other cheaper services here.

Why not lean into that?

So that's one of the potential hits that we could see in this near term, at least in the investor sentiment.

And the credit karma piece is interesting, especially at a time where so many consumers as we're looking across household balance sheets and continue to talk, especially on wealth, small pitch about the amount of people who are tapping or swiping their credit cards, and how credit card debt is at high levels right now, all time high levels that we've been tracking up against the number of people that are trying to figure out OK, how do I make sure that my credit is in good standing on the other side of this economic cycle?

If we do see a recession and the consumer sentiment surveys and the data that continues to come out showcases exactly where, uh, more consumers are trying to prepare for that?