Raymond James raises Guidewire Software PT to $275 from $255, keeps Outperform rating.

Raymond James raises Guidewire Software PT to $275 from $255, keeps Outperform rating.

Raymond James has raised its price target for Guidewire Software (NYSE:GWRE) to $275 from $255, while maintaining an Outperform rating. The move comes on the heels of the company's strong fourth-quarter performance and robust financial results [1].

Guidewire Software reported a 22% year-over-year (YoY) growth in revenue for the fourth quarter of 2025, driven by a 33% increase in subscription revenue and a significant contribution from cloud-based solutions, which now account for 74% of total annual recurring revenue (ARR) [2]. The company's ARR surpassed $1.03 billion, reflecting a 19.4% YoY increase [3].

The firm cited several key growth drivers for Guidewire, including increasing carrier modernization needs, accelerating cloud migrations, and potential diversification through product development in areas like pricing and claims automation, including new generative AI solutions [1]. Additionally, Guidewire's recent win with Liberty Mutual reinforces its market position in the insurance software sector [1].

Raymond James highlighted Guidewire's "fantastic" fourth-quarter performance, which included record and accelerating bookings with 22% YoY fully ramped ARR growth and improved outlook across all metrics [1]. This momentum is reflected in the company’s robust 18.61% revenue growth and overall GOOD financial health score [1].

Analysts have responded positively to these developments. Stifel raised its price target for Guidewire to $300 from $270, while RBC Capital increased its target to $300 from $290, both maintaining their respective ratings [1]. These recent developments underscore Guidewire's successful transition and expansion in the cloud sector.

Guidewire's financial health further validates its growth trajectory. Free cash flow rose 25.6% to $237.7 million in FY2025, providing flexibility for reinvestment in R&D or shareholder returns [2]. For FY2026, management projected total revenue of $1.385 billion to $1.405 billion and ARR of $1.21 billion to $1.22 billion, reflecting confidence in continued cloud adoption [2].

Despite its strengths, Guidewire faces challenges such as competition from emerging insurtech players and macroeconomic headwinds. However, its long-term contracts and recurring revenue model mitigate these risks [2]. The 10-year deal with a Tier-1 insurer, for instance, provides a stable revenue stream and reduces exposure to short-term market volatility [2].

For shareholders, Guidewire's cloud-driven growth trajectory offers compelling long-term value. The company's ability to convert its market leadership into recurring revenue, coupled with its innovation in AI and analytics, positions it to outperform peers. As the P&C insurance industry accelerates its digital transformation, Guidewire's cloud platform is not just a growth engine but a foundational asset for insurers navigating an increasingly complex landscape.

References:
[1] https://www.investing.com/news/analyst-ratings/raymond-james-raises-guidewire-stock-price-target-to-275-on-strong-bookings-93CH-4226326
[2] https://www.ainvest.com/news/guidewire-software-gwre-q4-earnings-outperformance-growth-trajectory-assessing-sustainability-cloud-driven-revenue-shareholder-2509/