What Happened:
Shares of insurance industry-focused software maker Guidewire (NYSE:GWRE) jumped 16.3% in the morning session after the company announced a "beat and raise" quarter. Guidewire beat analysts' revenue, billings, and ARR (annual recurring revenue) expectations. Its full-year ARR guidance also beat Wall Street's estimates. One negative was that its gross margin decreased, but it didn't matter much in the face of a "beat-and-raise" quarter. Zooming out, we think this was a solid quarter, showing the company is staying on track.
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What is the market telling us:
Guidewire's shares are somewhat volatile and over the last year have had 4 moves greater than 5%. But moves this big are very rare even for Guidewire and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 11 months ago, when the company gained 5% on the news that Stifel's analyst covering the stock upgraded the company's rating from Hold to Buy and raised the price target from $75 to $85, citing the successful transition to the cloud. The analyst surveyed P&C (Property & Casualty) insurers and found that Guidewire's cloud transition is gaining momentum, positioning the company for long-term growth in the P&C insurance space. The analyst expects improved margins and significant opportunities from cloud migrations.
Guidewire is up 18.2% since the beginning of the year. Investors who bought $1,000 worth of Guidewire's shares 5 years ago would now be looking at an investment worth $1,327.
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