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This Analyst Thinks Guidewire Needs To Work Through Near-Term Changes

Jayson Derrick

Software provider to the P&C insurance industry company Guidewire Software Inc (NYSE: GWRE) reported Thursday fiscal fourth-quarter results which were better than expected but management's guidance disappointed, according to JMP.

The Analyst

JMP analyst Patrick Walravens maintains a Market Perform rating on Guidewire's stock.

The Thesis

Guidewire reported a six cent EPS beat in the fiscal fourth quarter and a $3 million revenue beat at $208 million, Walravens wrote in a note. However, revenue was down 13% from last year and annual recurring revenue rose 13% but short of management's initial guidance of 15% to 18%.

Management's guidance for the fiscal first quarter was disappointing as EPS was guided at one cent to five cents versus the consensus estimate of 27 cents. Revenue of $149 million to $153 million was also short of expectations at $187 million.

The company's leadership position within the $2 trillion global P&C insurance industry remains unchanged but management needs to address multiple near-term changes, the analyst wrote. These include: evolving the business to better service Guidewire cloud demand, transforming to a subscription revenue company, transitioning the new CEO Mike Rosenbaum, implementing a greater usage of ramped deals and deal with the competitive landscape as rivals Duck Creek and Majesco continue maturing and strengthening.

View more earnings on GWRE

Finally, Guidewire's stock is fairly valued at 7.6 times 2021 estimated EV/revenue and 33.7 times 2021 estimated EV/free cash flow versus the vertical software peer group median at 6.3 times and 24.0 times, respectively.

Price Action

Shares of Guidewire Software hit a new 52-week high of $110.67 Friday morning and were trading higher by more than 18% at $113.05.

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Latest Ratings for GWRE

Date Firm Action From To
Sep 2019 Maintains Overweight
Mar 2019 Downgrades Overweight Neutral
Feb 2019 Reinstates Buy

View More Analyst Ratings for GWRE
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