From Intuit's Woes to the Magnificent Seven's Strength

SPEAKER_1 (0:00)

Let's go deep on Intuit in our Tech Spotlight. Joining us now for that is Victoria Fernandez, Chief Market Strategist at CrossMark, a global investment, joining us here at the Big Board. Victoria, it's good to see you. Happy Friday to you.

Victoria Fernandez (0:11)

Same to you.

SPEAKER_1 (0:12)

All right, so let's start our conversation on Intuit with the fact that you all own it. You say your large cap growth strategy has not been a grower over the past year.

Victoria Fernandez (0:21)

It has not.

SPEAKER_1 (0:22)

This one's been tough to own if you bought it a year ago, year over year, down about 50%.

Victoria Fernandez (0:27)

About 50%.

SPEAKER_1 (0:28)

Yeah. Tell us about your views on it now.

Victoria Fernandez (0:31)

Yeah, so originally when we look at Intuit, we really like it because of its business itself, right? It's dependable items that people use consistently every year, every quarter, and we like that, something that generates consistent revenue. But it's been struggling and at the beginning of the year, like you said, it's down about 50% this year. A lot of that coming from that whole sasspocalypse scare that we had, where it wasn't just Intuit. I mean, it was Adobe, it was Salesforce, it was all of these tech names, where people thought these softwares would get replaced with AI.

We didn't think that would happen and we assumed there would be a comeback. And we start to see a little bit of a turn towards the end of the summer. And a lot of that is coming from the fact that Intuit is talking about three main drivers in their business that's generating about 30% growth. They talked a lot of it in their shareholder meeting this week, really going after mid-sized businesses, increasing financial services that they have, and doing the assisted tax preparation, which for one, since I use TurboTax myself, I would be happy with that. But really embracing AI right now, and doing their Intuit intelligence platform to really do kind of soup to nuts for businesses across the board, especially mid-sized businesses.

SPEAKER_1 (1:47)

We've seen a lot of recovery in software names in the aftermath of the SaaS apocalypse, particularly within the past month. Why do you think Intuit hasn't participated in that? It feels like the market has said, they still think AI is going to be, I always use the friend or foe to these things. It seems like the market is saying it's still foes Intuit. Why is that?

Victoria Fernandez (2:09)

I think part of the reason, and Intuit will actually talk about this themselves, is they're not getting the customer base they thought they would get. It's much slower in gaining customers. They're trying to put things out that will help bring customers in. They've got free businesses that they can use in some of their software items or very low cost that they're doing to try to bring more customers in, and they're trying to get people across more elements. So you don't just use TurboTax, but you use QuickBooks or you use MailChimp or many of their items. So they're working on that, but it hasn't been as successful as they wanted it to be, and I think that's really holding back. Even though they've increased their dividend, they're doing share buybacks, these things you would think would help lift the stock price more, I think that's what's holding them back. They're just not having the customer base yet.

SPEAKER_1 (2:57)

Okay. What do you want to see over the next couple quarters from Intuit to reiterate your conviction on this one?

Victoria Fernandez (3:04)

Yeah, I want to continue to see growth in these three drivers that they're talking about. It's great that it started off well, but we need to see continued growth in these drivers, and we've got to see the customer base pick up. Obviously, as we go into the beginning of a new year in 2027, the tax component will start to come into play. Let's see if they can bring more customers in with a lot of the elements they're doing there with assisted tax preparation, but that's what we need to see. We need to see customer growth and continued movement in their three base cases.

SPEAKER_1 (3:32)

Let's widen our conversation out a little bit to the state-of-the-tech trade. Tech is the one sector that's holding up in today's market when we see a weaker market as we see yields rise, back flirting with that 5% level on the tenure today.

How would you characterize the state-of-the-tech trade now?

Victoria Fernandez (3:51)

Yeah, it's interesting because we have the whole rotation out of tech, right? And it was going into energy, to health care, to financials. And now we're seeing tech come back. It's actually been one of the best performing sectors this week. You look almost 75% of tech names are above their 20-day moving average. So from a technical perspective, that sector is one of the best performers out there right now. And you're actually seeing some of those MAG7 names start to come back. You talked about AAPL a moment ago. We're seeing AAPL break out, getting close to new highs. You're actually seeing Meta start to turn around, which I don't think we would have said very much a couple months back.