Company Reports

We raise our fair value estimate to $125 per share from $102 for wide-moat Guidewire, after a strong fiscal fourth quarter that topped our revenue estimate while falling short of our aggressive profitability estimate. The full-year revenue outlook was among the strongest we have seen in our coverage over the last couple of years. Management is bullish about the demand environment, which is showing up in results and guidance. We raise our revenue growth estimates over the next several years based on a strong guide and surging annually recurring revenue, or ARR, but we still see shares as overvalued. We still see Guidewire as the primary winner as the property and casualty insurance industry continues to modernize and display durable momentum, with customers selecting the platform.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

We raise our fair value estimate to $102 per share from $98 for wide-moat Guidewire, after the firm reported strong fiscal third-quarter results that bested our expectations on both the top and bottom lines. We raise our near-term estimates based on more rapid improvements in operations and solid guidance, but we still see shares as overvalued. Management believes the demand environment is gaining momentum for the property and casualty insurance industry, but said that this vertical should not be conflated with enterprise software overall. Guidewire also made good progress with its shifting of implementation projects to system integration partners, which helps margins. Guidance for the year was raised by slightly more than the upside in the quarter, which we view as a bullish sign. We continue to see Guidewire as the primary winner as the P&C insurance industry continues to modernize and display durable momentum, with customers selecting the platform.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

We are raising our fair value estimate to $98 per share, from $94 previously, for wide-moat Guidewire. We raised our near-term profitability estimates based on more rapid improvements in operations, but we still see shares as overvalued. While we do not see major changes in the demand environment, the firm is showing flashes of improvement. Guidewire reported solid second-quarter results that were slightly shy of our expectations for revenue but easily outpaced our profitability assumptions. The outlook was reduced, with revenue $19 million lower at the midpoint as a result of a faster-than-expected shift of implementation work to partners, while non-GAAP operating profit dollars were unchanged for the same reason, as implementation services are very low or even negative margin. Given the margin profile, we welcome the accelerating shift to partners. We continue to see Guidewire as the primary winner as the property-casualty insurance industry continues to modernize and displays durable momentum with customers selecting the platform.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

Wide-moat Guidewire reported nice first-quarter results that exceeded our revenue and profitability expectations. The outlook was mixed, with key second-quarter measures being slightly light, while full-year revenue was unchanged, and full-year profitability was raised by a little less than the outstanding results from the first quarter. Based on rapid progress toward the firm’s gross margin target for next year, we are raising our fair value estimate to $94 per share from $91 previously, leaving shares fairly valued. We continue to see Guidewire as the primary winner as the property-casualty insurance industry continues to modernize and have durable momentum in seeing customers selecting the platform.

Wide-moat Guidewire reported good fourth-quarter results featuring upside to revenue and profitability, while providing a solid outlook for fiscal 2024. Management expressed confidence in the firm’s progress and rightly so, as Guidewire continues to win replacement deals against competitors even for more modern installations. This is consistent with last quarter and is an emerging trend that could have a meaningful long-term impact if it persists. We are also impressed with significant deal activity at the largest insurers. Based on results and guidance, we slightly raised our estimates and are therefore raising our fair value estimate to $91 per share from $88 previously. We continue to see Guidewire as the primary winner as the property-casualty insurance industry continues to modernize and see consistent momentum in Tier 1 insurers selecting the platform.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

Wide-moat Guidewire had been on a roll in terms of quarterly results, but that came to an end with a messy report for its fiscal third quarter. The company reported revenue and profitability shortfalls, while offering mixed guidance. On the positive side, we see clear signs of momentum, with eight go-lives, bigger deals being signed, and an emerging dynamic where the company is starting to see newer systems come up for bid in a desire to move to the cloud. During the quarter the company repurchased 855,000 shares including its normal and accelerated programs. Based on results and guidance, we modestly reduced our growth estimates and are therefore lowering our fair value estimate to $88 per share from $95 previously. We continue to see Guidewire as the primary winner as the property-casualty, or P&C, insurance industry continues to modernize and see consistent momentum in Tier-1 insurers selecting the platform.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty, or P&C, insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

Wide-moat Guidewire continues to report good results in its fiscal second quarter for key measures, including revenue and non-GAAP operating profit. The firm went live with nine installations, including one Tier-1 customer and five Tier-2 customers. Full-year guidance was raised slightly for revenue and operating profit, as management sees momentum with go-lives and new deals, as well as gross margin progression. During the quarter the company repurchased 3.2 million shares for $200 million under its recently approved authorization. Based on results and guidance, we made only minor tweaks to our model and are therefore maintaining our fair value estimate of $95 per share. We continue to see Guidewire as the primary winner as the property-casualty, or P&C, insurance industry continues to modernize and see consistent momentum in Tier-1 insurers selecting the platform. Like for much of our coverage, we view the stock as attractive for long-term investors.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty, or P&C, insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

Wide-moat Guidewire once again reported solid results with upside to both revenue and non-GAAP operating profits relative to guidance for its first quarter. Guidance for the second quarter was in line with our thinking on both measures as well. Management noted the demand environment remains steady and that the company began buying back shares under its new repurchase authorization. Considering these factors, we made a few modest adjustments to our model and are thus maintaining our fair value estimate of $95 per share. Like for most of our coverage, we view the stock as attractive for long-term investors. We continue to see Guidewire as the primary winner as the property-casualty, or P&C, insurance industry continues to modernize and see consistent momentum in Tier 1 insurers selecting the platform.

Guidewire hosted an analyst day and provided updates on its cloud transition progress and other strategic initiatives, along with a re-examination of its long-term operating model, which was unchanged. The meeting was largely uneventful after the midterm target reduction on the fourth-quarter earnings call last month. We were relieved to hear the environment has not deteriorated further in the last two months. Accordingly, our investment thesis is unchanged and we are maintaining our wide moat rating and $95 per share fair value estimate. We still view Guidewire as the leader in core software systems for the property and casualty insurance market and that the transition to the cloud is better for the company, its customers, and investors alike. While our model shows upside from current levels, we would prefer to invest in cleaner stories such as ServiceNow and Salesforce given macroeconomic uncertainty.

Wide-moat Guidewire extended its streak of solid results with upside to both revenue and non-GAAP operating profits relative to guidance for its fourth quarter. Guidance was mixed, with better-than-expected revenue and lower-than-expected profitability. Management noted that customers have changed their buying patterns and are initially committing to smaller deals. As a result, the company also noted it expects lower profitability and lower growth in annual recurring revenue, or ARR, through fiscal 2025 than it had previously guided to, and will provide more detail at its upcoming investor day.

We believe Guidewire is reaping the benefits of years of groundwork in the form of convincing property and casualty, or P&C, insurers to upgrade their aging core legacy systems to Guidewire’s solutions. In our view, the company has used a modern software platform to disrupt a sleepy industry that has been underserved by legacy software vendors, and we still see a long runway for additional growth for Guidewire.

Wide-moat Guidewire reported good results relative to guidance and broader street expectations for its third quarter. Implied guidance for fourth quarter is in line with our revenue assumption and just shy of our profitability estimates. The firm also provided a constructive preliminary outlook for next year. Based on modestly lower profitability assumptions, we lower our fair value estimate to $120 per share, from $126.