The digital transformation of companies across sectors has driven demand sharply higher for cloud-based products and solutions in the past decade. Several cloud stocks have outpaced the broader markets in recent years, and are positioned to continue delivering robust gains in the future, as well.
Valued at $3.46 billion by market cap, nCino (NCNO) is one such cloud-based company. Let’s see what Wall Street is forecasting next for NCNO stock.
An Overview of nCino
nCino is a cloud-based SaaS (software-as-a-service) company that provides software applications to financial institutions in the U.S. and other international markets. Its nCino Bank Operating System is a secure, cloud-based solution offering banks reporting capabilities across business lines, such as customer relationship management (CRM), loan origination, account opening, credit analysis, and much more.
The nCino IQ is an application suite that leverages artificial intelligence (AI) and machine learning tech to provide enterprise-facing customers with automation and insights into business operations. Moreover, nCino offers SimpleNexus, which aims to simplify the process of homeownership from an internet-enabled device.
How Did nCino Perform in Fiscal Q3 of 2024?
In fiscal Q3 of 2024 (ended in January), nCino reported revenue of $121.9 million, an increase of 16% year over year. Its subscription sales stood at $104.8 million, up 19% year over year. nCino improved gross margins during the period while earnings beat consensus, despite several industry-wide headwinds.
Similar to other tech stocks, nCino benefits from a high operating leverage, allowing it to improve profit margins at a faster pace compared to revenue. It ended Q3 with a non-operating margin of 17%, 1,400 basis points higher than the year-ago period.
In Q3, nCino onboarded its first enterprise bank for consumer lending, as it added a new $200 billion U.S. bank as its largest customer. nCino also signed an expansion agreement with a regional bank with $35 billion in assets. Moreover, nCino signed its largest customer in Japan, Yamaguchi Financial, which manages $150 billion in assets.
However, the tech stock fell following its Q3 results, as it missed operating income and free cash flow consensus forecasts in the quarter. Revenue guidance was also light, and analysts noted that a few deals were delayed as banks continued to assess expense budgets amid a challenging macro environment.
nCino expects revenue between $123.5 million and $125.5 million, with subscription sales between $105.5 million and $107.5 million in fiscal Q4 of 2024. Its guidance assumes subscription sales to grow by 15% at the midpoint of its range.
Further, non-operating income is forecast between $15 million and $16 million with adjusted earnings between $0.11 and $0.13 per share.
What Is the Target Price for NCNO?
Out of the 14 analysts covering NCNO, six recommend “strong buy,” one recommends “moderate buy,” six recommend “hold,” and one recommends “moderate sell,” for a consensus rating of “moderate buy.” The average target price for NCNO stock is $35, indicating an upside potential of 13.5%.
However, Piper Sandler analyst Brent Bracelin last month slapped a new Street-high price target of $42.00 on nCino stock, backing a “buy” rating in the process. That forecast implies expected upside of 36% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
