Baird has increased its price target on shares of Guidewire (NYSE: NYSE:GWRE), a provider of software products to insurers, from $152.00 to $165.00, while reiterating its Outperform rating on the stock.
The firm highlighted Guidewire's performance during the fiscal year 2024, which included significant advancements in cloud migration, improved subscription gross margins, and a notable rise in free cash flow per share.
Guidewire has reportedly achieved its subscription gross margin targets a year ahead of schedule, with an expansion of 1,000 basis points year-over-year. This improvement is a key factor in Baird's continued positive outlook on the company.
Additionally, Guidewire has seen a six-fold increase in free cash flow per share, further underpinning the analyst's confidence in the stock's future performance.
Baird's assessment suggests that investors can anticipate an annualized return potential of 10-15% through the period of cloud transition maturity. The firm believes that if Guidewire continues to reach its margin targets ahead of time or experiences faster growth, these factors could drive even higher returns.
In other recent news, Guidewire Software has seen several positive revisions from financial firms following robust fiscal third-quarter results. DA Davidson, Baird, Oppenheimer, and Wells Fargo (NYSE:WFC) have all increased their price targets for Guidewire, citing strong annual recurring revenue (ARR), robust sales activity, and a favorable market environment.
DA Davidson raised its price target from $142 to $168, maintaining a Buy rating, while Baird increased its target to $152, noting a 15% year-over-year increase in ARR. Oppenheimer raised its price target to $170, and Wells Fargo increased its target to $140, both citing strong market dynamics and financial performance.
RBC Capital maintained an Outperform rating and a $130 price target, attributing Guidewire's success to momentum in cloud services and increased customer migration activities.
InvestingPro Insights
Guidewire (NYSE:GWRE) has been a company of interest for those tracking the technology and insurance sectors, and recent data from InvestingPro underscores some key aspects of its financial performance and market position. With a market capitalization of $12.3 billion, the company's valuation reflects significant investor confidence, particularly in light of its 71.93% one-year total return and a price that is hovering near its 52-week high at 96.7% of that peak.
InvestingPro Tips highlight that Guidewire is expected to see net income growth this year, which could be a driving factor behind Baird's positive assessment and increased price target. Additionally, the company has shown a strong return over the last three months, with a 35.64% price total return, which may contribute to Baird's outlook of an annualized return potential of 10-15% for investors.
Despite the company not being profitable over the last twelve months and trading at a high Price/Book multiple of 9.57, analysts are predicting profitability this year, aligning with Baird's optimistic view. It's worth noting that Guidewire does not pay a dividend, focusing instead on reinvesting in its growth and cloud migration efforts. For those interested in a deeper dive, InvestingPro offers additional insights and tips on Guidewire, available at their dedicated product page.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.