Intuit bets on buybacks, but has Wall Street really mispriced shares?

Each tax season shines a light on Intuit, the company behind TurboTax and QuickBooks. But this year, investors are paying attention to the company for another reason.

Shares have dropped sharply as Wall Street debates whether AI could disrupt traditional software companies.

INTU shares have fallen more than 30% this year (nearly 40% from their peak), but management says the market is missing the bigger picture.

The debate driving sentiment

Intuit’s leadership team recently made two major moves designed to signal confidence in the company’s long-term value. First, executives halted planned stock sales under prearranged trading programs. Next, the company accelerated share buybacks, meaning Intuit is essentially betting house money on its stock.

Investors are weighing the impact of several key details, including:

• $3.5B remaining in Intuit’s share-repurchase authorization
• The company already bought $1.8B in the first half of its fiscal year
• Execs want to roughly double that pace in the second half

Based on current plans, Intuit would potentially double the total amount of FY2025 buybacks. CFO Sandeep Aujla defended the bold bet, asserting that leadership believes the market has created an AI “boogeyman” that doesn’t reflect the company’s true market position or performance.

And key earnings numbers further suggest Intuit’s core business remains strong. Last-quarter revenue was up 17% year-over-year, operating income jumped 44%, and the company’s flagship products continue to add new users.

The company argues that its combination of AI, human resources, and data puts Intuit on course to expand in its sector, not shrink.

Big investors keep digging for clues

Institutions remain heavily involved in the stock, accounting for the ownership of roughly 85% of INTU shares. And analyst sentiment also comes with a bullish slant. TD Cowen agrees the stock is undervalued and maintains a “buy” rating while Rothschild & Co. recently issued a $700 price target.

The broader analyst consensus sees targets clustered around $600, imply around 33% upside vs. recent levels.

That optimism is supported by Intuit’s valuation, which currently stands at about 17x forward earnings (or roughly half its five-year average). In other words, much of the bad news surrounding Intuit appears to have already been priced in by Wall Street.

Buybacks are getting a lot of attention, but that development alone isn’t a guarantee the stock will rebound. It is, however, a clear sign that insiders think the market has the story wrong … and some Wall Street shops seem to agree.