Intuit Stock, Down 45%, Has More Room to Fall

Widely known for its TurboTax and QuickBooks services, Intuit is a leading business and financial management solutions provider. The company is on track to grow revenue by over 30% this fiscal year. With over 100 million customers globally and more cash than debt on its balance sheet, it is safe to say that Intuit has a very bright future.

Not that the market cares. The stock is down 38.5% so far this year and 45% from its record high in November, 2021. At one point in May, the share price of Intuit fell below $340, down by 52.7% from the all-time high. The reason for this sharp selloff can be found in the extremely high valuation the stock started sliding from. The company earned $7.55 in 2021, meaning that investors who bought at $700 a share in November paid a P/E ratio higher than 90. Unfortunately for them, even a best-in-class company such as Intuit couldn’t possibly justify such a high valuation.

More often than not, a big decline in the stock of a great business should be viewed as a buying opportunity. Besides, Intuit is expected to earn close to $12 a share this fiscal year. Does this mean the stock is a buy below $400? Alas, valuation and business quality alone cannot tell us where is the price headed to next. So, we turn to Elliott Wave analysis instead.

Intuit Stock Elliott Wave analysis

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The 4-hour chart of Intuit reveals that the crash from $717 to $339 is a clear five-wave impulse. The pattern is labeled 1-through-5, where the five sub-waves of both wave 3 and 5 are also visible. The price has even taken the guideline of alternation into account, since wave 2 is a running flat, while wave 4 is a sharp corrective recovery.

According to the theory, impulses point in the direction the bigger pattern is going. This means Intuit stock has most likely in the middle of a simple (A)-(B)-(C) zigzag retracement. If this count is correct, we can expect a recovery in wave (B) towards the resistance near $500 a share. Once there, however, the bearish 5-3 wave cycle would be complete and more weakness in wave (C) should be expected.

Downside targets below the bottom of wave (A) at $339 would be there for the taking once wave (C) starts. Even the anticipated 2023 EPS of ~$14 is not enough to make Intuit a bargain at the current price of $388. Right now, both valuation and Elliott Wave analysis suggest the stock has more room to fall in the months ahead. We’ll watch from a safe distance.

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