Guidewire Analysts Remain Divided Over Its Cloud Business Prospects Amid Uncertain Macros - Guidewire Software (NYSE:GWRE)

Wells Fargo analyst Michael Turrin maintained Guidewire Software Inc GWRE with an Underweight and lowered the price target from $60 to $55.
Guidewire's seasonally light Q1 results were primarily in-line and modestly above Turrin's estimates with $5 million better-than-expected ARR, $3 million better-than-expected revenue, and operating income of ~$7 million above the analyst's estimate.
However, the FY23 revised guide was relatively unchanged.
Management suggested the insurance industry remains relatively stable compared to other more macro-sensitive verticals, indicating customer decision-making and sales cycles have not meaningfully changed.
The analyst believes the underlying transition will continue to weigh on this model until the cloud business can show additional signs of maturity and scale.
The price cut reflects the underlying business model transition, relatively muted revenue and margin outlook, and lack of FCF support.
RBC Capital analyst Rishi Jaluria maintained Overweight with a $100 price target reflecting the analyst's positive long-term outlook.
The most positive to the analyst was a meaningful upside to subscription gross margins and raised FY outlook for 49% margins, increasing his confidence in the path to the FY25 target and eventual FCF margins of 30%+.
Additionally, while GWRE is not immune to macro and inflation, dynamics remain stable and a relatively minor headwind, strengthening Jaluria's view of GWRE's macro resiliency.
While expecting inflation to lead to some conservatism from vendors, the analyst foresees Guidewire's business to remain more resilient in the current macro environment than most software vendors.
Jaluria remains positive on the company's market leadership, attractive vertical opportunity, and favorable financial model exiting the cloud transition.
Price Action: GWRE shares traded higher by 5.5% at $59.59 on the last check Wednesday.

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