Software provider to property and casualty insurers Guidewire Software (NYSE: GWRE) stock has plunged (-31%) in this year but is staging a comeback with the launch of its first Guidewire Cloud offering known as Elysian. Guidewire provides mission-critical essential software systems to the $2.5 trillion global property and casualty insurance industry with many non-discretionary products that help keep it resilient during economic uncertainty. The Company continues to see momentum in its subscription model and strong interest in its cloud platform with new and existing insurer clients worldwide. The durable industry is “remarkably” resilient in the face of market volatility and macroeconomic uncertainty and should prove to be a good recession hedge. Most its clients have been in business for decades with some over a century having survived recessions, depressions, inflation, and period of economic instability. It’s total addressable market (TAM) has expanded to $21 billion, which provides a long runway. The Company closed eight Tier-1 customers this year along with two data and analytics deals in the quarter as insurers are hungry for real-time data through their claims and policy workflows. Prudent investors seeking a stable digital infrastructure play in the insurance sector can watch for opportunistic pullbacks in shares of Guidewire Software.
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Q3 Fiscal 2022 Earnings Release
On June 7, 2022, Guidewire released its fiscal third-quarter 2022 results for the quarter ending March 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.25) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.28), beating estimates by $0.02. Revenues rose 20.4% year-over-year (YoY) to $197.45 million beating analyst estimates for $187.73 million. ARR was $637 million, beating prior guidance of $632 million to $635 million. The Company ended the quarter with $1.1 billion in cash and cash equivalents. Guidewire CEO Mike Rosenbaum commented, “In the third quarter, we exceeded our outlook for revenue and ARR driven by continued momentum for Guidewire Cloud, closing another eight cloud deals in the quarter. This momentum is a result of the terrific progress we are making with Guidewire Cloud and also the resilience and durability of our customer base and the industry we serve.”
In-Line Guidance
Guidewire issued in-line revenue guidance for fiscal Q4 2022 between $226 million to $232 million versus $230.62 million consensus analyst estimates. ARR is expected between $668 million and $674 million.
Conference Call Takeaways
CEO Rosenbaum set the tone in regard to servicing a durable industry that is both resilient and indispensable in the face of periods of economic uncertainty. The property and casualty insurance sector is a $2.5 trillion global industry that provides essential products to indemnify businesses against risk. The Company provides these insurers with mission critical indispensable systems of record sold in a recurring revenue model. With most of its clients being in business for decades and even some over a century, they have exhibited the ability to weather economic downturns and instability. Guidewire cloud comprised nearly 90% of its bookings with eight deals in the quarter bring its 2022 total to 24. The Company saw 20 data and analytic deals and went live cloud deployment with five customers in the quarter. This brings the total to 59 cloud go lives across InsuranceNow and InsuranceSuite. He added that one of world’s largest insurers went live on PolicyCenter. Due to the complexity of projects, Guidewire deployments rely on a partner community of over 4,400 Guidewire Cloud certified consultants, up 169% YoY. Total consultants grew 42% to 18,000 with eight new solution partners added in the quarter for over 150 total. CEO Rosenbaum described the Elysian product, “It provides the flexibility and agility insurers need to deliver innovation faster to their customers. Elysian delivers new innovation, supporting accelerated speed to market, better risk insights and embedded insurance solution and an elevated developer experience.”
GWRE Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for GWRE stock. The weekly rifle chart inverse pup breakdown formed an initial bottom off the $69.64 Fibonacci (fib) level. Shares staged a rally to test the weekly downtrend at the weekly 5-period moving average (MA) resistance at $77.72 with the 15-period MA resistance near the $84.13 fib. The weekly lower Bollinger Bands (BBs) sit at $67.82 as the weekly stochastic stalls just below the 30-band for a bearish mini inverse pup down through the 20-band or a bullish cross up through the 30-band. The weekly market structure low (MSL) buy triggers on a breakout through the $84.78 level. The daily rifle downtrend is attempting a reversal as the rising 5-period MA at $74.14 attempts to crossover up through the 15-period MA at $75.43. The daily stochastic has a mini pup testing the 40-band with 50-period MA at $80.65 and daily upper BBs at $86.76. The daily lower BBs sit at $66.71. Prudent investors can watch for opportunistic pullback levels at the $74.33 fib, $71.64 fib, $69.64 fib, $66.18 fib, $65.03 fib, $62.37 fib, and the $59.15 fib level. Upside trajectories sits at the $89.55 fib up towards the $98.68 fib level.
