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Tax season 2021: Intuit benefits from 10 million people opening brokerage accounts last year

Yahoo! Finance logo Yahoo! Finance 2/24/2021 Brian Sozzi

A big year for the markets in 2020 that sucked in a ton of new retail investors looking to cash in has TurboTax owner Intuit poised to benefit this tax season, says CEO Sasan Goodrazi.

"Around the rise of retail investors, we are foreseeing a huge rise in the U.S., India and Brazil. Although we don't serve consumers in India and Brazil, we have small businesses that we serve and we are seeing an incredible increase [in TurboTax use]," Goodrazi told Yahoo Finance Live. "Our offering within TurboTax Live is actually benefiting from the rise of retail investors, so we will see how the season plays out but we are excited."

A stunning 10 million new brokerage accounts were opened in 2020, according to a report from JMP Securities. The Wall Street Journal first reported the stat on Dec. 30. Some 8 million accounts were opened in the first nine months of the year, as investors chased performance on the Nasdaq Composite and looked to score on hot stocks such as Tesla.

The Nasdaq went on to finish 2020 up 43.6%, the best annual performance since 2009. The Dow Jones Industrial Average finished up 7.3% on the year, while the S&P 500 clocked in with a 16.3% gain.

Now, analysts say Intuit's premium-priced TurboTax Live service could see a lift in business as those new to the market seek out expert tax advice. The added tailwind here for TurboTax are folks continuing to avoid in-person meetings with accountants during COVID-19.

diagram: This Thursday, Feb. 22, 2018 photo shows a display of TurboTax software in a Sam's Club in Pittsburgh. (AP Photo/Gene J. Puskar) © Provided by Yahoo! Finance This Thursday, Feb. 22, 2018 photo shows a display of TurboTax software in a Sam's Club in Pittsburgh. (AP Photo/Gene J. Puskar)

"We believe 8 million-plus people who opened new brokerage accounts in 2020 would either need tax filing assistance or upgrade to TurboTax Premier (price of $70) to file capital gains/losses. This brings a potential new opportunity for TurboTax to drive units higher," says Mizuho Securities analyst Siti Panigrahi, who rates Inuit shares a Buy.

Thus far, a delay in the start to tax filing season to Feb. 12 due to COVID-19 has weighed on Intuit's business.

Intuit said after the close of trading Tuesday that fiscal second quarter sales fell 7% year-over-year to $1.6 billion. Earnings fell to 7 cents a share from 91 cents a share a year ago.

But Intuit shares rose 3% anyway in Wednesday trading, likely as the company expects a large upswing in business this quarter as tax season kicks into high gear.

For the full fiscal year, Intuit sees sales rising 15% to 17%. Non-GAAP EPS are expected to increase 4% to 7%.

"Intuit is still one of our favorite large caps," said Jefferies analyst Brent Thill. "Intuit stock is on track to post 13 straight years of positive returns, including year-to-date +5%. We like Intuit for its market leadership in tax and small business, tailwinds from live assist offerings, U.S.-centric revenue mix (~95%), mid 30s% operating margins, cash flows that fund stock buybacks ($2.2 billion authorized), and dividends that grow double-digits."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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