Guidewire's Lack of Positive Catalysts Keeps Analyst On Sidelines

Last week, Needham analyst Mayank Tandon attended Guidewire Software, Inc's GWRE analyst day, where management highlighted the company's progress on its model transition as P&C insurance carriers shift their core systems to the cloud.
His key takeaway from the event is that the company is gaining steady momentum by signing new and existing customers to the cloud.
However, given the softening economic environment, recent customer wins are signing on with shorter commitments versus prior periods, which in turn is expected to weigh on near-term and medium-term subscription growth and is delaying the margin benefits from the transition to the cloud.
While he views GWRE as a premium provider of insurance cloud software, given the prolonged model transition and modest subscription revenue growth, he considers the risk-reward neutral in a October 10 note titled "Analyst Day Takeaways; Lack of Positive Catalysts Keeps Us on the Sidelines."
Accordingly, we maintained a Hold rating.
Wells Fargo analyst Michael Turrin maintained Guidewire Software with an Underweight and cut the price target from $65 to $60.
Price Action: GWRE shares traded lower by 3.56% at $61.01 on the last check Monday.

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