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Yahoo
6 days ago
- Business
- Yahoo
Guidewire Rises 23% YTD: Where Will the Stock Head From Here?
Guidewire Software GWRE stock has appreciated 23.3% year to date compared with the Zacks Internet Software industry's growth of 23.7%. The broader Computer and Technology sector and the S&P 500 composite have returned 14.6% and 9.5%, respectively, over the same time frame. San Mateo, CA-based Guidewire is a provider of software solutions for property and casualty insurers. GWRE closed last session at $207.87. The stock is trading 21% down from its 52-week high of $263.20. Does the pullback indicate a buying opportunity? Price Performance Image Source: Zacks Investment Research Let us dive into GWRE's pros and cons and determine the best course of action for your portfolio. Factors Driving Growth for GWRE Guidewire is benefiting from strong momentum in its cloud business, fueled by rising demand from insurers moving away from legacy systems toward cloud-based solutions. The company has strategically expanded its cloud ecosystem, now encompassing 26,000 Guidewire-specialized practitioners across 38 system integrators. Its focus on enhancing the Guidewire Cloud platform with new capabilities, including digital frameworks, automation, tooling and other cloud services, is expected to boost sales of subscription-based solutions in the long haul. Also, the company announced its first sale of Guidewire Industry Intelligence, a pre-built predictive model embedded into ClaimCenter workflow in the last reported quarter. This solution is trained and validated using anonymized data available on Guidewire's cloud deployments. This not only represents a new revenue opportunity but is a value addition for insurers looking to make data-driven claims decisions. In the fiscal third quarter of 2025, Guidewire secured 17 new deals, 14 for various InsuranceSuite Cloud applications and three for InsuranceNow. These included seven core system wins with Tier 1 insurers and three with Tier 2 insurers. Guidewire Software, Inc. Price, Consensus and EPS Surprise Guidewire Software, Inc. price-consensus-eps-surprise-chart | Guidewire Software, Inc. QuoteManagement's efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. Non-GAAP gross margin expanded to 65.5% from 62.6% on a year-over-year basis. The subscription and support segment's gross margin increased to 70.6% from 65.6% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency, along with $4 million in credits received from its cloud service provider. Services' non-GAAP gross margin was 12.9% against negative 10.3% in the year-ago quarter. For the fiscal fourth quarter, non-GAAP operating income is estimated in the range of $52-$60 million. Non-GAAP operating income for fiscal 2025 is estimated between $187 million and $195 million compared with $175-$185 million expected by strong collections, Guidewire generated $32.4 million in cash from operations in the quarter under discussion, while free cash flow was nearly $27.8 million. As of April 30, 2025, cash and cash equivalents and short-term investments were $1,243.7 million, with $673.7 million of long-term debt. The company's ability to generate positive cash flow while continuing to invest in growth initiatives provides a solid foundation for by strong revenue performance in the fiscal third quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.178 billion and $1.186 billion compared with earlier guidance of $1.164 billion to $1.174 billion. Subscription revenues are now forecasted to be $660 million, while subscription and support revenues are expected to be $724 million. Services revenues are expected to be approximately $215 million. Image Source: Zacks Investment ResearchIn the past 60 days, analysts have marginally revised estimates upwards for the current year. GWRE Faces Headwinds Higher costs remain a concern for Guidewire, especially amid prevailing weakness in global macroeconomic conditions. In the fiscal third quarter, total operating expenses increased 12.1% year over year to $178.2 million. Increasing costs can put downward pressure on the company's profitability, especially if the revenue performance weakens. Guidewire increasing global footprint, with new customers primarily coming from diverse markets such as Japan, Brazil, Belgium and other international regions, presents foreign exchange as well as integration risks. Strengthening the U.S. dollar could further exacerbate these challenges. Also, these initiatives involve execution risk, especially in regions with different regulatory requirements. If integration delays arise, these could weigh on operating margins or delay expected revenue contributions. GWRE stock is also not so cheap, as its Value Style Score of F indicates a stretched valuation at this moment. The stock is trading at a premium with a forward 12-month price/sales of 12.95X compared with the industry's 5.84X. Retain GWRE Stock With a Zacks Rank #3 (Hold), GWRE appears to be treading in the middle of the road and new investors could be better off if they trade with caution. The stock is also trading at a premium valuation. New investors could wait for a better entry point to capitalize on its long-term fundamentals, while investors owning the stock can stay put. Stocks to Consider Some better-ranked stocks worth consideration with the same industry space are Arista Networks (ANET), Astera Labs ALAB and F5, Inc. FFIV. All stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here. The Zacks Consensus Estimate for ANET's 2025 earnings is pegged at $2.81 per share. ANET's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.8%. Its shares have gained 62.1% in the past year. The Zacks Consensus Estimate for ALAB's 2025 EPS is pegged at $1.35, unchanged in the past 60 days. Astera Labs' earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 32.2%. Its shares have surged 394.1% in the past year. The Zacks Consensus Estimate for FFIV's fiscal 2025 EPS is pegged at $15.26, unchanged in the past seven days. FFIV's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.46%. Its shares have gained 70.6% in the past year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report F5, Inc. (FFIV) : Free Stock Analysis Report Guidewire Software, Inc. (GWRE) : Free Stock Analysis Report Arista Networks, Inc. (ANET) : Free Stock Analysis Report Astera Labs, Inc. (ALAB) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Sign in to access your portfolio
Yahoo
04-06-2025
- Business
- Yahoo
GWRE Q1 Earnings Call: Cloud Platform Drives Growth, Misses Revenue Expectations, Raises Guidance
Insurance industry-focused software maker Guidewire (NYSE:GWRE) fell short of the market's revenue expectations in Q1 CY2025, but sales rose 22% year on year to $293.5 million. Its non-GAAP EPS of $0.88 per share was 88.1% above analysts' consensus estimates. Is now the time to buy GWRE? Find out in our full research report (it's free). Revenue: $293.5 million (22% year-on-year growth) Adjusted EPS: $0.88 vs analyst estimates of $0.47 (88.1% beat) Adjusted Operating Income: $46.06 million vs analyst estimates of $39.63 million (15.7% margin, 16.2% beat) Revenue Guidance for Q2 CY2025 is $336 million at the midpoint, above analyst estimates of $332.2 million Operating Margin: 1.5%, up from -6.9% in the same quarter last year Annual Recurring Revenue: $960 million at quarter end, up 15.9% year on year Billings: $289.3 million at quarter end, up 27.8% year on year Market Capitalization: $18.3 billion Guidewire's first quarter results reflected significant customer adoption of its cloud platform and broad-based momentum across the property and casualty insurance industry. CEO Mike Rosenbaum highlighted, 'We closed 17 cloud deals, 14 for at least one of our InsuranceSuite applications, and three for InsuranceNow.' Management attributed the progress to strong execution, particularly among large insurers, and pointed to international traction in Canada, Asia Pacific, and Europe. In addition to robust cloud migrations and expansions, the company's recent acquisition of Quanti was cited as a strategic move to enhance its pricing and rating technology capabilities. The quarter also saw notable customer go-lives, including Cincinnati Insurance Company and Santa Lucia, further validating Guidewire's cloud strategy. Looking ahead, Guidewire's increased guidance is underpinned by expectations for continued growth in annual recurring revenue and accelerated adoption of its cloud offerings. Management believes that investments in product innovation, such as Guidewire Industry Intelligence and generative AI use cases, will expand the platform's relevance for both large and smaller insurers. CFO Jeff Cooper stated the company expects to maintain upper-teens annual recurring revenue growth, driven by larger, longer-term customer commitments and record-low attrition. CEO Rosenbaum emphasized the importance of international markets, with a $60 million investment planned for Japan, signaling a long-term commitment to global expansion. However, management acknowledged that execution in the upcoming quarter is critical, given the high concentration of sales activity and variability in large deal timing. Management attributed the quarter's performance to strength in cloud adoption, successful execution in large and international markets, and early traction with advanced analytics products. Cloud adoption momentum: Guidewire continued to see increased demand for its cloud platform, with 17 new cloud deals and a strong mix of migrations, expansions, and net new wins. Management emphasized that Tier 1 and Tier 2 insurers are increasingly replacing legacy systems to enable faster product launches and business agility. Expansion of InsuranceNow: The company reported three net new InsuranceNow wins, including two of the largest ever on the product. CEO Rosenbaum attributed this success to improvements in the product and closer integration with Guidewire's cloud platform, making it more competitive in the lower tiers of the insurance market. International growth and investment: Guidewire highlighted notable cloud expansion in Canada, APAC, and EMEA, and announced a $60 million investment in Japan over five years to deepen local operations and partnerships. Management views this as a strategic move to capture growing demand from Japanese insurers amid evolving regulations and market dynamics. Advanced analytics and AI initiatives: The first sale of Guidewire Industry Intelligence, a predictive analytics model embedded in the claims workflow, was positioned as an initial step toward monetizing cloud-based industry data. Management also discussed generative AI use cases in claims processing, underwriting, and developer productivity, as key areas of customer interest. Quanti acquisition integration: The addition of Quanti's pricing and rating technology is expected to enhance Guidewire's ability to support more agile actuarial and pricing strategies. The integration is underway, with management noting its applicability for both large and small insurers looking to modernize pricing processes. Guidewire's outlook is shaped by expectations for continued cloud deal momentum, product innovation, and international expansion, tempered by execution risks in large deal timing and ongoing investments. Cloud platform expansion: Management expects sustained demand for Guidewire Cloud Platform, especially as more insurers pursue core system modernization to improve agility. The company sees ongoing migrations and expansions as a key source of recurring revenue growth. Product innovation and analytics: Guidewire plans to broaden adoption of Industry Intelligence and AI-driven tools, aiming to create value for insurers lacking in-house data resources. The rollout of new predictive models and integration of Quanti's capabilities are expected to differentiate Guidewire's platform and drive incremental revenue opportunities. International market commitments: The company's investment in Japan and expansion across Europe and Asia-Pacific are intended to capture market share as global insurers seek compliant, modern technology solutions. However, management cautioned that large deal timing and the pace of international adoption could cause variability in quarterly results. In the coming quarters, the StockStory team will monitor (1) continued growth in annual recurring revenue as Guidewire targets the $1 billion milestone, (2) customer adoption and expansion of Guidewire Industry Intelligence and other analytics tools, and (3) execution of the $60 million investment in Japan and resulting traction with local insurers. We will also track the integration of Quanti's technology and progress in cloud deal momentum globally. Guidewire currently trades at a forward price-to-sales ratio of 14.4×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
