Analyst Note| Dan Romanoff, CPA |
For the sixth consecutive quarter, wide-moat Guidewire reported material upside, which was offset again by a weaker-than-expected outlook for the next quarter. The outlook for the full year was also light. Given the emerging pattern of significant quarterly outperformance following guide downs, as well as a relatively new leadership team, we are not necessarily surprised by guidance. We see management hitting their stride, with 10 InsuranceSuite deals closed even in the face of COVID-19-driven macro uncertainty, and no real negative execution surprises. Ten deals would have been a great year two years ago. We continue to believe that a transition to a true SaaS model is ultimately better for Guidewire and investors, as results should no longer be whipsawed because of a single large deal. Further, we continue to expect the company should be the primary winner, as the property and casualty insurance industry continues to modernize over the next decade. Based on results and subsequent model fine-tuning, we are maintaining our fair value estimate at $112 per share, and see shares as modestly overvalued.