Citi lifts Guidewire stock target to $199, maintains neutral stance

On Friday, Citi analyst Tyler Radke adjusted the price target for Guidewire Software Inc . (NYSE:GWRE) shares, increasing it to $199 from $192, while keeping a Neutral rating on the stock. According to InvestingPro data, the company is currently trading above its Fair Value, with a P/E ratio of 515x. Radke highlighted that Guidewire’s second-quarter results surpassed expectations with both Annual Recurring Revenue (ARR) and revenue exceeding guidance, supported by 12.92% year-over-year revenue growth. The period saw the closure of 12 cloud deals, including three with Tier 1 customers, four InsuranceSuite wins, and five new clients, particularly noting robust sales in Europe.

Guidewire’s profitability metrics, such as gross margins (GM) of 60.76% and operating profit margins (OPMs), were also above estimates, attributed to better-than-anticipated revenue performance and reduced operational expenditures. The company maintains strong liquidity with a current ratio of 2.66x, and InvestingPro analysis shows 7 analysts have revised their earnings upward for the upcoming period. Radke pointed out that while the company’s full-year 2025 ARR forecast saw a slight increase, the third-quarter ARR projection was somewhat below expectations, with a higher fourth-quarter weighting due to the timing of ramp deals.

Despite the positive quarterly performance and raised guidance, Radke’s stance remains neutral. The analyst expressed caution due to Guidewire’s valuation, which includes a high free cash flow (FCF) premium, and its profitability metrics still lagging behind those of industry peers such as Autodesk (NASDAQ:ADSK), PTC Inc. (NASDAQ:PTC), Veeva Systems (NYSE:VEEV), and CCC (WA:CCCP) Intelligent Solutions (CCCS). For deeper insights into Guidewire’s valuation and peer comparison, access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.

In conclusion, Radke’s revised estimates now sit at the upper end of the company’s guidance, with the new price target representing a 4% increase, implying a 55x multiple on the fiscal year 2026 estimated enterprise value to free cash flow (EV/FCF). The stock has demonstrated strong momentum with a 59.91% return over the past year, though its current Price/Book ratio of 12.32x suggests rich valuation levels.

In other recent news, Guidewire Software (ETR:SOWGn) reported its financial results for the second quarter of fiscal year 2025, highlighting a 20% increase in total revenue to $289 million, surpassing expectations. The company also saw a notable 35% growth in subscription and support revenue, reaching $178 million. Guidewire’s annual recurring revenue (ARR) grew by 15% year-over-year, exceeding the consensus estimate and reaching $918.1 million. Analysts at Citizens JMP responded to these strong results by raising the price target for Guidewire to $250, maintaining a Market Outperform rating. The firm also closed 12 new cloud deals, further expanding its customer base. Guidewire’s non-GAAP gross margin was reported at 65.2%, beating the consensus of 64.0%, and its non-GAAP operating margin was 18.6%, significantly higher than the expected 15.0%. The company has raised its ARR outlook to between $1,000 million and $1,010 million, indicating a 16-17% year-over-year growth. Guidewire’s strategic focus on cloud solutions and expanding its global footprint continues to bolster its market position.

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