Guidewire (GWRE) Surges 76.1% YTD: Will the Trend Continue?
Guidewire Software GWRE witnessed healthy momentum this year so far. Shares of the company have gained 76.1% in the same time frame compared with the sub-industry’s growth of 31.1%.
The company is a leading provider of software solutions for property and casualty (P&C) insurers. Further, it offers Guidewire InsuranceSuite and Guidewire InsuranceNow, which provide solutions to support the entire insurance lifecycle.
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Catalysts Behind the Price Surge
Let’s delve deeper to unearth the factors working in favor of this Zacks Rank #3 (Hold) stock.
The company’s performance is gaining from higher revenue growth across the subscription and support business segment. We expect subscription and support revenues to witness 26% year-over-year growth in fiscal 2024.
Per a report from Fortune Business Insights, the global Software-as-a-Service market is expected to witness a CAGR of 18.7% between 2023 and 2030. This is expected to favor the company’s growth prospects.
The company is slowly shifting from the term license-based model to a subscription base. This will be beneficial for the company in the long run as the majority of enterprises are expected to lean toward cloud-based infrastructure in the future.
Going ahead, the company plans to capitalize on the rapid demand for data and analytics. The company continues to develop an ecosystem of partners, including SIs and solution providers, which helps to drive sustained go-live activity and greater value from the platform.
The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to boost sales of subscription-based solutions. Guidewire Cloud continues to gain momentum with seven cloud deals in the fiscal first quarter.
Apart from its solid fundamentals, the company is prone to a few risks. The company’s products and services are only meant for P&C insurers. This leads to a lack of product diversification. Also, frequent acquisitions made by the company lead to rising integration risks.
A Look at Estimates
The company’s earnings are expected to increase 162.8% and 81.9% on a year-over-year basis in fiscal 2024 and 2025, respectively. The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has improved 37.3% and 24.6%, respectively, in the past 90 days.
GWRE’s fiscal 2024 and 2025 revenues are anticipated to rise 8.5% and 11.8% year over year, respectively.
Guidewire has an average brokerage recommendation (ABR) of 1.76 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.
Stocks to Consider
Some better-ranked stocks worth considering in the broader technology space are Blackbaud BLKB, NETGEAR NTGR and Watts Water Technologies WTS. Watts Water Technologies sports a Zacks Rank #1 (Strong Buy), while Blackbaud and NETGEAR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Blackbaud’s 2023 EPS has inched up 1.8% in the past 60 days to $3.86. BLKB’s long-term earnings growth rate is 23.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.6%. Shares of BLKB have gained 49% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days. NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise was 127.5%. Shares of NTGR lost 17% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies 2023 EPS has improved 3.9% in the past 60 days to $8.08.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.8%. Shares of WTS have soared 42.5% in the past year.
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NETGEAR, Inc. (NTGR) : Free Stock Analysis Report
Blackbaud, Inc. (BLKB) : Free Stock Analysis Report
Guidewire Software, Inc. (GWRE) : Free Stock Analysis Report
Watts Water Technologies, Inc. (WTS) : Free Stock Analysis Report
