Guidewire Software, Inc. (NYSE:GWRE) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. Results overall were solid, with revenues arriving 5.7% better than analyst forecasts at US$180m. Higher revenues also resulted in substantially lower statutory losses which, at US$0.10 per share, were 5.7% smaller than the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus, from the 13 analysts covering Guidewire Software, is for revenues of US$729.8m in 2021, which would reflect a noticeable 4.2% reduction in Guidewire Software's sales over the past 12 months. Losses are forecast to balloon 450% to US$1.39 per share. Before this earnings announcement, the analysts had been modelling revenues of US$729.8m and losses of US$1.39 per share in 2021.
As a result there was no major change to the consensus price target of US$124, implying that the business is trading roughly in line with expectations despite ongoing losses. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Guidewire Software analyst has a price target of US$150 per share, while the most pessimistic values it at US$88.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 8.2% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that Guidewire Software's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Guidewire Software's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Guidewire Software going out to 2023, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with Guidewire Software (including 1 which is a bit concerning) .
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.