Guidewire Software, Inc. (NYSE: GWRE) defied analysts’ forecasts by releasing its second quarter results, which were ahead of market expectations. Overall, results were strong, with revenue 5.7% higher than analysts’ forecast at US $ 180 million. Higher earnings also resulted in significantly lower statutory losses which, at US $ 0.10 per share, were 5.7% lower than analysts expected. Analysts usually update their forecasts with each earnings report, and we can judge from their estimates whether their view of the business has changed or if there are new concerns to consider. So we’ve put together the latest post-earnings forecast to see what the estimates suggest for next year.
Based on the latest results, the current consensus, of the 13 analysts covering Guidewire Software, is for 2021 revenue of US $ 729.8 million, which would reflect a notable 4.2% reduction in Guidewire sales. Software in the last 12 months. Losses are expected to rise 450% to US $ 1.39 per share. Prior to this earnings announcement, analysts had modeled revenues of $ 729.8 million and losses of $ 1.39 per share in 2021.
As a result, there have been no major changes from the consensus price target of US $ 124, implying that the company is trading roughly as expected despite ongoing losses. The consensus price target is only an average of individual analysts’ targets, so it might be helpful to see the breadth of the range of underlying estimates. Guidewire Software’s most bullish analyst has a price target of US $ 150 per share, while the most pessimistic puts it at US $ 88.00. These price targets show that analysts have different views on the company, but the estimates don’t vary enough to suggest that some are betting on wild success or complete failure.
Of course, another way to look at these forecasts is to put them in context to the industry itself. We would like to point out that sales are expected to reverse, with a forecast of 8.2% annualized revenue decline by the end of 2021. This is a notable change from historical growth of 14% over the past five years. In contrast, our data suggests that other companies (with analyst coverage) in the same industry are expected to see their revenues increase by 13% per year for the foreseeable future. It’s pretty clear that Guidewire Software’s revenue is expected to be significantly lower than the industry at large.
The bottom line
The most important thing to remember is that analysts have reconfirmed their estimates of loss per share for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting that sales are on track – although our data suggests Guidewire Software’s revenue is expected to outperform the industry as a whole. There has been no real change to the consensus price target, suggesting that the intrinsic value of the company has not undergone any major changes with the latest estimates.
That said, the company’s long-term earnings trajectory is much bigger than next year. We have a forecast for Guidewire Software through 2023, and you can see them for free on our platform here.
In addition, you should also educate yourself about the 2 warning signs we spotted with Guidewire Software (including 1 which is a bit disturbing) .
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