Intuit Inc.'s shares rose slightly Thursday morning after a Citigroup Inc. analyst upgraded the stock, in part because of the personal financial management and tax preparation software vendor's deals to buy two payments companies.
Brent Thill raised his rating on Intuit to "buy," from "hold."
In a research report issued Thursday, he wrote that there is still risk for Intuit in making acquisitions "outside its sweet spot." However, he expects the Mountain View, Calif., company to raise its 2007 revenue growth guidance to 15%, from 8% to 10%, after the two deals close.
Intuit said in November that it would buy the online banking vendor Digital Insight Corp. Last month it announced a deal for the transaction processing software vendor Electronic Clearing House Co.
Intuit shares were up 0.54% in Thursday afternoon trading, at $30.75.
Kiran Patel, Intuit's chief financial officer, said last week at a New York conference sponsored by Needham & Co. that the deals are not risky, and that her company's expertise could raise Digital Insight's earnings.
"This combination will significantly accelerate Digital Insight's growth rate," Mr. Patel said.
Small businesses are "rapidly beginning to use online banking," but "all of the solutions are really aimed at consumers, so small businesses are really using consumer-based solutions," he said. "We think there is a significant opportunity for us to participate" by making online banking products based on Intuit's desktop business software.
Mr. Thill wrote that despite Intuit's confident statements, there has been "investor concern around the announced acquisitions," as well as a lack of information about the upcoming tax season. However, after speaking with Intuit's chief executive, Steve Bennett, "we are more comfortable with the acquisition transition."
The coming tax season was also a factor in Mr. Thill's upgrade. Intuit has increased its customer base from last year and raised its prices for its TurboTax software, he wrote, and it typically bounces back from a weak January once "tax data" starts arriving in early February, he wrote.
Both deals are expected to close this quarter.
