Guidewire Software Analysts Cut Share-Price Targets

Guidewire Software analysts cut their share-price targets on after the property-casualty-insurance-software provider revised its revenue estimate lower.
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Shares of Guidewire Software  (GWRE) - Get Report dropped as analysts cut their price targets after the insurance-software provider lowered its revenue guidance for fiscal 2020.

The company forecast revenue of $702 million to $714 million for the year ending July 31, down from its prior estimate of $759 million to $771 million.

“The growing interest in cloud-based systems is dampening self-managed demand, impacting our full year outlook,” Guidewire CEO Mike Rosenbaum.

To be sure, he sees that as a long-term benefit. “Ultimately, this trend is a positive validation of our cloud strategy and reinforces our confidence in serving the more than $2 trillion [property and casualty] industry," Rosenbaum said.

Some analysts saw the quarter a little differently. While interest in self-managed demand indeed weakened, any increase in cloud interest hasn’t translated to new license sales yet, they said. They also questioned the company’s subscription revenue model.

Wells Fargo cut its price target for Guidewire shares to $85 from $100, Robert Baird to $124 from $143 and Needham to $120 from $140.

Earnings for the second quarter ended Jan. 31 exceeded analysts’ expectations. Adjusted earnings per share totaled 21 cents a share, down from 33 cents a share in the year-earlier quarter, but above analysts’ forecast of 12 cents, according to FactSet.

Revenue registered $173.5 million in the latest quarter, up from $168.5 million a year ago and surpassing analysts’ projection of $163.8 million.

The company posted a net loss of $34 million for the fiscal second quarter, widened from $30.9 million a year earlier.

At last check Guidewire shares traded at $92.71, down 18%.