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Intuit shares drop despite analyst support

Shares of the software maker continue to fall after a revenue warning overshadows several positive research notes.

    Intuit shares fell as much as 9 percent Friday despite the fact that the company announced no news. The drop was a continuation of the stock's 29 percent slide Thursday, when it warned that revenue numbers would be lower.

    But analysts said the stock has been oversold, and that the sell-off is an unwarranted reaction to overly high expectations for Thursday's analyst meeting.

    Intuit's shares had recovered slightly by midday from an early morning low of $26.69, down just $1.19 to $28.62. The Mountain View, Calif.-based company makes the Quicken line of personal finance software.

    Friday's decline may also have something to do with a downgrade from Goldman Sachs, which overshadowed several positive research notes. Intuit was downgraded to "market outperform" from "trading buy" by analyst Michael S. Hodes.

    But the comments in Hodes' report were far from negative. This is not "the tip of the iceberg type of announcement," Hodes wrote. "In fact, the sell-off strikes us as a buying opportunity."

    Hodes said he issued the downgrade because the company's strengthening sales in its Tax and QuickBooks divisions have not been vigorous enough.

    Pacific Crest Securities analyst Tim Butler reiterated a "strong buy" rating Friday, and said shares are "dramatically oversold, creating an attractive entry point."

    He interpreted the sell-off in Intuit shares as a result of the fact that "most analysts (including himself) had such high expectations for positive news heading into the Analyst Day," a company's annual or twice-yearly meeting with analysts to give a presentation of its standing. Several analysts had thought the company would even raise guidance, he added.

    Salomon Smith Barney analyst Matthew Vetto also said the sell-off was "overblown" and that the company's downward revisions to estimates aren't indicative of larger problems.

    J.P. Morgan Chase's Stephen Fitzgibbons sang the same tune: "The stock's sharp drop seems extreme relative to the guidance change," he wrote in a report.

    Intuit didn't like the spin investors put on its Thursday announcement, either. After making its statement on Thursday--in which it said it would see slower-than-expected fiscal 2001 revenue growth, but remains comfortable with earnings forecasts--Intuit issued another press release Friday, saying exactly the same thing.

    Thursday, Intuit said revenue will be between $425 million and $450 million for the third quarter, below First Call's estimate of $467 million. It also said revenue will be between $1.26 billion and $1.3 billion for the full fiscal year. First Call had been expecting $1.31 billion for the full year.

    Earnings, or pro forma operating income for fiscal 2001 were reiterated. The company still expects $205 million to $213 million. It also foresees pro forma operating income growth at more than 20 percent during the next three fiscal years.

    In Friday's statement, Intuit emphasized that earning of $205 million to $213 million were unchanged from previous expectations and represented greater than 32 percent annual growth.

    The company also restated that it will achieve a minimum pro forma operating income growth of between 25 percent and 30 percent for fiscal year 2002, which begins Aug. 1. Intuit will meet third-quarter and fourth-quarter numbers it announced during its second-quarter report--earnings of $165 million to $170 million in the third quarter and pro forma operating losses of $47 million to $52 million in the fourth quarter, the company said.