Analyst Lise Buyer of Credit Suisse First Boston reduced her rating to "buy" from "strong buy" and pushed her third-quarter revenue estimate down to $327 million from $343 million. Buyer attributed the decline to slower sales of the company's Quickbook software over the past six weeks as measured by research firm PC Data.
"The market reaction was tremendously overblown," Buyer said in an interview. She also said that her previous revenue estimates were above Wall Street consensus. "I had a very aggressive number, that was a best-case scenario. I just brought my revenue number back down to where everybody else was."
Shares in the Mountain View, Calif.-based company fell $9.31 today to $41 on a volume of 9.4 million shares, more than twice the average daily trading volume.
Buyer also said that she rarely gives a company a "strong buy" rating. She said that a company's fundamentals should show that it's at least 30 percent undervalued and also have news that will act as a catalyst for the stock in the near term. Buyer said the stock is undervalued but sees no recent news that could lift the stock.
She also added that the situation could change in a few months.
According to Intuit, Quickbook sales reached $106 million, nearly 25 percent of total revenue, in the second quarter ended Jan. 31. In the first quarter, the software generated $53.6 million in sales, or about 33 percent of overall revenue.
"Quickbook's sales were stronger than expected last summer and fall. As we pointed out at the time, the strength might have been caused by strong upgrade demand ahead of Y2K," Buyer said in her report.
Buyer left her earnings estimates for fiscal years 2000 and 2001 unchanged because "management has already adjusted spending plans to coincide with the slightly slower revenue growth," she said in her report.
In February, Intuit's Quickbooks 2000, which is used primarily by small businesses for accounting, fell to 16th place on PC Data's list of top-selling software, down from ninth place in January. Quicken Deluxe fell to 12th place from sixth place. Overall, Intuit products held eight of the 20 spots on the list in February.
Buyer concluded her report by saying, "Given the tough Quickbook comparisons and the seasonal nature of the business, we are temporarily reducing our rating...Nonetheless we firmly believe that the 12-month prospects for Intuit, the company, and the stock are very, very compelling."
Intuit earned $847.5 million in revenue last year. Buyer estimates that it will generate $1.08 billion in sales, down from $1.11 billion. The company will report third-quarter earnings in late May. Analysts surveyed by First Call expect the company to post earnings of 33 cents a share.