Intuit Downgraded to Neutral by BofA on AI Competition and Growth Concerns

Bank of America Securities has downgraded Intuit (INTU) to Neutral from a Buy rating, citing concerns that artificial intelligence is reshaping the tax software market and that the company faces a period of slower growth. The firm also lowered its price target on the financial software company's stock to $360 from $400.

The Analyst's Thesis

In a note issued Wednesday, BofA described the upcoming fiscal year as a transitional period for Intuit, with fewer near-term catalysts to drive the stock higher. The firm has revised its financial models to reflect a more conservative outlook, cutting its fiscal 2027 revenue forecast for Intuit to $23.4 billion from a previous $23.9 billion.

More significantly, BofA slashed its adjusted earnings per share (EPS) estimate for fiscal 2027 to $23.02, a steep reduction from its prior forecast of $27.23. Analysts at the bank see fiscal 2027 as an "investment year" and project that Intuit's adjusted earnings will decline by 5.2% before returning to growth in subsequent years.

TurboTax and AI Headwinds

The primary concern highlighted by BofA centers on Intuit's flagship TurboTax product. The bank noted that Intuit's own growth expectation for the division is just 2.2%, substantially below the Street's consensus forecast of 6.8% growth.

Ad

This weakness suggests that customers may be shifting toward lower-cost, AI-powered alternatives for tax preparation. BofA also pointed to softness in new customer additions and moderating growth in other business segments, with online customer growth at approximately 3%. In response to this environment, Intuit has reduced its long-term growth target for its Global Business Solutions unit to a range of 10%-15%, down from 15%-20%.

Pockets of Strength

Despite the downgrade, BofA acknowledged several areas of strong performance within Intuit's portfolio. The firm noted that Intuit's strategy to acquire customers through lower-priced and free offerings could weigh on near-term profitability but may position users for higher-value products over time.

Key areas of strength included:

• The Assisted Tax, Money, and Mid-Market segments, which collectively grew 34% and now account for 30% of total revenue.
• Credit Karma revenue expanded by 16%, ahead of the firm's expectations.
• The company's operating margin of 33.3% surpassed the Street's estimate of 30.8%.