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Guidewire Software GWRE shares ended the last trading session 11.5% higher at $204.60. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 5.1% gain over the past four weeks.
The stock price appreciation can be attributed to Guidewire’s strong financial performance. Moreover, the company is set to join S&P MidCap 400 by replacing Arrowhead Pharmaceuticals Inc on Jan. 27.
Guidewire is gaining strength from higher deal volume, especially in Tier 1, and healthy momentum in the international domain (Asia Pacific and Europe). Steady growth in the Guidewire Cloud with nine deal wins in the last reported quarter bodes well.
Management’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. In the last reported quarter, the subscription and support segment’s gross margin increased to 70.3% from 65.4% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency.
Driven by strong revenue performance in the fiscal first quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.155 billion and $1.167 billion compared with earlier guidance of $1.135-$1.149 billion. Subscription revenues are forecasted to be $648 million, while subscription and support revenues are expected to be $713 million. Services revenues are expected to be approximately $205 million. It continues to expect ARR for fiscal 2025 to be in the range of $995-$1,005 million.
This provider of software to the insurance industry is expected to post quarterly earnings of $0.52 per share in its upcoming report, which represents a year-over-year change of +13%. Revenues are expected to be $285.69 million, up 18.6% from the year-ago quarter.
While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For Guidewire Software, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on GWRE going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>