Guidewire Earnings: Demand from Larger and International Customers Drive Strength

We raise our fair value estimate to $145 per share from $140 for wide-moat Guidewire, after another good quarter featuring better-than-expected results and guidance. This quarter represents another in a string of good (or better) quarters for the company that has helped propel our estimates higher. Momentum is clearly on Guidewire’s side from many angles, including successful implementations, improving win rates, cloud migrations, and larger deals. Management is bullish about the demand environment, which continues to manifest in both results and guidance. As a result, we inched our near-term growth and margin estimates upward. Despite our estimates being above FactSet consensus estimates for this year and next, we see shares as overvalued. However, we acknowledge strong momentum and continue to view Guidewire as the clear leader in core software for the P&C insurance industry.