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Wells Fargo analyst Michael Turrin maintained Guidewire Software Inc (NYSE: GWRE) with an Underweight and lowered the price target from $60 to $55.
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Guidewire’s seasonally light Q1 results were primarily in-line and modestly above Turrin’s estimates with $5 million better-than-expected ARR, $3 million better-than-expected revenue, and operating income of ~$7 million above the analyst’s estimate.
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However, the FY23 revised guide was relatively unchanged.
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Management suggested the insurance industry remains relatively stable compared to other more macro-sensitive verticals, indicating customer decision-making and sales cycles have not meaningfully changed.
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The analyst believes the underlying transition will continue to weigh on this model until the cloud business can show additional signs of maturity and scale.
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The price cut reflects the underlying business model transition, relatively muted revenue and margin outlook, and lack of FCF support.
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RBC Capital analyst Rishi Jaluria maintained Overweight with a $100 price target reflecting the analyst’s positive long-term outlook.
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The most positive to the analyst was a meaningful upside to subscription gross margins and raised FY outlook for 49% margins, increasing his confidence in the path to the FY25 target and eventual FCF margins of 30%+.
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Additionally, while GWRE is not immune to macro and inflation, dynamics remain stable and a relatively minor headwind, strengthening Jaluria’s view of GWRE’s macro resiliency.
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While expecting inflation to lead to some conservatism from vendors, the analyst foresees Guidewire’s business to remain more resilient in the current macro environment than most software vendors.
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Jaluria remains positive on the company’s market leadership, attractive vertical opportunity, and favorable financial model exiting the cloud transition.
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Price Action: GWRE shares traded higher by 5.5% at $59.59 on the last check Wednesday.
Latest Ratings for GWRE
|
Date |
Firm |
Action |
From |
To |
|---|---|---|---|---|
|
Mar 2022 |
Wells Fargo |
Maintains |
Underweight |
|
|
Dec 2021 |
BTIG |
Maintains |
Buy |
|
|
Oct 2021 |
B of A Securities |
Downgrades |
Neutral |
Underperform |
View More Analyst Ratings for GWRE
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