On Thursday, Baird increased its price target for Guidewire (NYSE:GWRE) Software Inc. (NYSE:GWRE) shares to $152 from the previous target of $140, while maintaining an Outperform rating on the stock.
The firm's analyst cited the company's Annual Recurring Revenue (ARR) of $828 million, which marked a 15% year-over-year increase, surpassing the consensus estimate of $818 million. This performance was highlighted as a more significant beat than in the first and second quarters.
Guidewire's subscription gross margins also impressed, reaching 65% compared to 55% year-over-year and exceeding the consensus of 64%.
The third-quarter sales activity for the company was robust, featuring accelerating migrations and strong activity with Tier-1 clients.
Looking ahead, the analyst noted that Guidewire's outlook for the fiscal year 2024, ending in July, has been revised upwards. The company now expects its ARR to be between $856 million and $864 million, representing approximately a 13% increase year-over-year, which is slightly above the prior range of $852 million to $862 million and consensus estimates of $857 million.
Operating cash flow (OCF) projections were also raised significantly to $130 million to $150 million, a substantial jump from $38 million year-over-year, aligning closely with the consensus of $138 million.
The analyst anticipates continued deal momentum into the fourth fiscal quarter, with ramped contracts likely to benefit future ARR. The fully-ramped contract values are expected to increase at or above 16% year-over-year. Guidewire's goal of achieving $1 billion in ARR by fiscal year 2025 is reportedly still on track, according to the firm's commentary.
In other recent news, Guidewire Software, Inc. has reported strong fiscal third-quarter earnings, with total revenue surpassing forecasts by 5% and Non-GAAP operating income exceeding expectations by a significant 160%.
As a result, DA Davidson has increased Guidewire's price target to $142 from $136 and maintained a Buy rating. The robust performance has led to DA Davidson revising their financial projections upward for the next two years.
Similarly, Wells Fargo (NYSE:WFC) has increased its price target for Guidewire to $140 from $130, citing strong deal momentum and the maturation of the company's cloud infrastructure.
RBC Capital has maintained an Outperform rating and a $130 price target, attributing the company's success to momentum in cloud services and increased customer migration activities.
Oppenheimer has also raised its price target to $140 due to the company's higher-than-anticipated Annual Recurring Revenue (ARR) of $828 million.
Guidewire's strong financial performance has been driven by a 33% year-over-year increase in InsuranceSuite cloud deals, exceeding prior guidance on all metrics. These recent developments underscore Guidewire's robust operational execution and potential for sustained growth.
InvestingPro Insights
Guidewire Software Inc . (NYSE:GWRE) has been a topic of bullish sentiment among some analysts, as highlighted by the recent price target increase from Baird. In the realm of real-time data, GWRE's market capitalization stands at a robust $10.54 billion, underscoring its significant presence in the software industry. Additionally, the company has demonstrated a commendable revenue growth of 8.97% over the last twelve months as of Q3 2024, indicating a steady upward trajectory in its financial performance.
InvestingPro Tips further enrich this positive outlook, with 10 analysts having revised their earnings upwards for the upcoming period, suggesting a consensus of confidence in the company's growth potential. Moreover, GWRE is anticipated to achieve profitability this year, which could be a pivotal milestone for investors to consider. The company has also seen a substantial return over the last year, with a 74.15% price total return, reflecting strong investor enthusiasm.
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