We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Guidewire Stock Sustain Momentum After Rallying 55% This Year?
Read MoreHide Full Article
Guidewire Software’s (GWRE - Free Report) shares have been performing well on the trading front with a gain of 54.8% in the past year compared with the S&P 500 composite and the industry’s growth of 26.4% and 27.5%, respectively.
Image Source: Zacks Investment Research
Closing last session at $168.86, the stock is trading 19.3% down its 52-week high of $209.15. Does this recent pullback indicate a buying opportunity? Let us dive into GWRE’s prospects and determine the best course of action for your portfolio.
Guidewire Cloud Is the Key Tailwind
Accelerating the uptake of Guidewire Cloud is a major tailwind. In the first quarter of fiscal 2025, Guidewire won nine deals, out of these, seven were for InsuranceSuite Cloud and five were with Tier 1 insurers. The company's focus on enhancing 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.
Driven by strong revenue performance in the fiscal first quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.155 billion and $1.167 billion compared with earlier guidance of $1.135-$1.149 billion. Subscription revenues are forecasted to be $648 million, while subscription and support revenues are expected to be $713 million. Services revenues are expected to be approximately $205 million.
As of Oct. 31, ARR was $874 million, up 13.5% year over year. It continues to expect ARR for fiscal 2025 to be in the range of $995-$1,005 million.
GWRE’s Improving Profitability and Balance Sheet
Management’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. In the fiscal first quarter, gross margin expanded to 63.5% from 58.4% on a year-over-year basis. The subscription and support segment’s gross margin increased to 70.3% from 65.4% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency.
Services’ non-GAAP gross margin was 19.7% compared with 10.3% in the year-ago quarter, due to solid utilization rates and reduced subcontractor costs. For the second quarter of fiscal 2025, non-GAAP operating income is estimated in the range of $39-$45 million, while for the fiscal year, the figure is estimated to be between $164 million and $176 million.
Guidewire has a strong balance sheet. As of Oct. 31, 2024, cash and cash equivalents and short-term investments were $1,480.4 million with $671.8 million of long-term debt. The solid liquidity position indicated that the company had made investments in the right direction and the excess cash would be used for pursuing strategic acquisitions, investing in growth initiatives and carrying out distribution to its shareholders.
Challenges Lie Ahead for GWRE
Guidewire’s transition from a term license-based to a cloud-based model will negatively impact the top line in the short haul. Service revenues are getting affected as the company invests more in its ecosystem of implementation partners.
Higher costs remain a concern for Guidewire, especially amid weakness prevailing over global macroeconomic conditions. In the fiscal first quarter, total operating expenses increased 11.7% year over year to $163.1 million. Increasing costs can put downward pressure on the company’s profitability.
GWRE’s Stretched Valuation
GWRE stock is trading at a premium with a forward 12-month Price/Sales of 11.49X compared with the industry’s 9.59X.
End Note
Strong financial performance, strategic initiatives in technology and robust market demand make Guidewire an attractive investment opportunity.
However, 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 premium valuation metrics and investors could wait for a better entry point to capitalize on its long-term fundamentals. Consequently, it might not be prudent to bet on the stock at the moment.
The Zacks Consensus Estimate for FTNT’s 2024 EPS is pegged at $2.23, unchanged in the past seven days. FTNT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 23.6%. Its shares have increased 62.5% in the past year.
The Zacks Consensus Estimate for IDCC’s 2024 earnings is pegged at $15.19 per share. IDCC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. Its shares have surged 80.3% in the past year.
The Zacks Consensus Estimate for FIVN’s 2024 EPS is pegged at $2.37, unchanged in the past seven days. Five9’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 22.46%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Can Guidewire Stock Sustain Momentum After Rallying 55% This Year?
Guidewire Software’s (GWRE - Free Report) shares have been performing well on the trading front with a gain of 54.8% in the past year compared with the S&P 500 composite and the industry’s growth of 26.4% and 27.5%, respectively.
Image Source: Zacks Investment Research
Closing last session at $168.86, the stock is trading 19.3% down its 52-week high of $209.15. Does this recent pullback indicate a buying opportunity? Let us dive into GWRE’s prospects and determine the best course of action for your portfolio.
Guidewire Cloud Is the Key Tailwind
Accelerating the uptake of Guidewire Cloud is a major tailwind. In the first quarter of fiscal 2025, Guidewire won nine deals, out of these, seven were for InsuranceSuite Cloud and five were with Tier 1 insurers. The company's focus on enhancing 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.
Driven by strong revenue performance in the fiscal first quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.155 billion and $1.167 billion compared with earlier guidance of $1.135-$1.149 billion. Subscription revenues are forecasted to be $648 million, while subscription and support revenues are expected to be $713 million. Services revenues are expected to be approximately $205 million.
As of Oct. 31, ARR was $874 million, up 13.5% year over year. It continues to expect ARR for fiscal 2025 to be in the range of $995-$1,005 million.
GWRE’s Improving Profitability and Balance Sheet
Management’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. In the fiscal first quarter, gross margin expanded to 63.5% from 58.4% on a year-over-year basis. The subscription and support segment’s gross margin increased to 70.3% from 65.4% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency.
Services’ non-GAAP gross margin was 19.7% compared with 10.3% in the year-ago quarter, due to solid utilization rates and reduced subcontractor costs. For the second quarter of fiscal 2025, non-GAAP operating income is estimated in the range of $39-$45 million, while for the fiscal year, the figure is estimated to be between $164 million and $176 million.
Guidewire has a strong balance sheet. As of Oct. 31, 2024, cash and cash equivalents and short-term investments were $1,480.4 million with $671.8 million of long-term debt. The solid liquidity position indicated that the company had made investments in the right direction and the excess cash would be used for pursuing strategic acquisitions, investing in growth initiatives and carrying out distribution to its shareholders.
Challenges Lie Ahead for GWRE
Guidewire’s transition from a term license-based to a cloud-based model will negatively impact the top line in the short haul. Service revenues are getting affected as the company invests more in its ecosystem of implementation partners.
Higher costs remain a concern for Guidewire, especially amid weakness prevailing over global macroeconomic conditions. In the fiscal first quarter, total operating expenses increased 11.7% year over year to $163.1 million. Increasing costs can put downward pressure on the company’s profitability.
GWRE’s Stretched Valuation
GWRE stock is trading at a premium with a forward 12-month Price/Sales of 11.49X compared with the industry’s 9.59X.
End Note
Strong financial performance, strategic initiatives in technology and robust market demand make Guidewire an attractive investment opportunity.
However, 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 premium valuation metrics and investors could wait for a better entry point to capitalize on its long-term fundamentals. Consequently, it might not be prudent to bet on the stock at the moment.
Stocks to Consider
Some better-ranked stocks worth consideration from the broader technology space are Fortinet (FTNT - Free Report) , InterDigital, Inc. (IDCC - Free Report) and Five9, Inc. (FIVN - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FTNT’s 2024 EPS is pegged at $2.23, unchanged in the past seven days. FTNT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 23.6%. Its shares have increased 62.5% in the past year.
The Zacks Consensus Estimate for IDCC’s 2024 earnings is pegged at $15.19 per share. IDCC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. Its shares have surged 80.3% in the past year.
The Zacks Consensus Estimate for FIVN’s 2024 EPS is pegged at $2.37, unchanged in the past seven days. Five9’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 22.46%.