Through TurboTax, Quickbooks, Credit Karma, and Mint, all of which benefit from network effects and high switching costs, Intuit has cleverly positioned itself as a toll road over which many small businesses and taxpayers choose to pass. Furthermore, the company’s shift to a more subscription-and-cloud-based model, which results in small monthly payments instead of large one-time-upgrade payments, and the rapidly-expanding value of Intuit’s growing network of services have made this toll feel like much more of a win-win for customers. We believe this dynamic will allow for consistent price increases in its subscription renewals. Additionally, we believe Intuit will continue to benefit both from long-term growth in global GDP as well as the continued migration of small businesses from excel-based accounting solutions to accounting software like QuickBooks. Remarkably, despite its long runway for growth opportunities, it is likely that very little capital will need to be reinvested to achieve this growth, increasing the earnings multiple investors should be willing to pay for the business.
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