2024-04-16 17:08:08 ET
Summary
- The technology sector has performed strongly, outperforming the S&P 500, with AI-focused software firms performing exceptionally well.
- Intuit's stock shows a bearish technical trend as it reverses from its peak.
- The AI bubble may influence Intuit's valuation as it focuses its investor marketing on AI product developments.
- I believe AI will improve Intuit's products, but not necessarily its profits, as competitors follow similar developments.
- INTU's valuation is high today if we assume its growth rate will slow or if higher interest rates will lower fair valuations. That said, INTU is not necessarily more overvalued than most technology firms.
The past year has been particularly strong for the technology sector, rising 36% compared to the S&P 500 at 22%. For the most part, most of the segment erased all of their 2022 losses, and many continued to rise to new peaks. That came despite no interest rate or inflation declines, which are historically inversely correlated to growth stock valuations. However, as macroeconomic fears have subsided, I argue that there's been another increase in speculative buying activity, encouraging the rebound of Bitcoin and "AI-centric" technology firms....
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Intuit: Likely Overvalued As AI Bubble Peaks, Offset By Impressive Growth Rate