- Wells Fargo analyst Michael Turrin maintained Guidewire Software Inc GWRE with an Underweight and lowered the price target from $60 to $55.
- 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.
- However, the FY23 revised guide was relatively unchanged.
- 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.
- 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.
- The price cut reflects the underlying business model transition, relatively muted revenue and margin outlook, and lack of FCF support.
- RBC Capital analyst Rishi Jaluria maintained Overweight with a $100 price target reflecting the analyst's positive long-term outlook.
- 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%+.
- 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.
- 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.
- Jaluria remains positive on the company's market leadership, attractive vertical opportunity, and favorable financial model exiting the cloud transition.
- Price Action: GWRE shares traded higher by 5.5% at $59.59 on the last check Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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