Analyst Note| Dan Romanoff, CPA |
For the eighth consecutive quarter, wide-moat Guidewire reported strong results offset by light guidance. We are pleased to see continued cloud traction and are surprised by large net new customers selecting on premise solutions. Overall, the firm saw 12 go-lives on 35 different products, with cloud momentum continuing. We see this as the beginning of a critical turning point in which customers have real proof points of Guidewire’s cloud-based solutions. On the negative side, we see continued margin pressure within subscriptions as the subscale cloud business ramps. Overall, we continue to see good outweighing the bad and we still believe that a transition to a true SaaS model is ultimately better for Guidewire. Further, we continue to expect the company should be the primary winner, as the P&C insurance industry continues to modernize. We are maintaining our fair value estimate of $116 per share and see shares as increasingly attractive as the software group has sold off recently.