The surge in demand for cloud-based products and solutions due to the digital transformation across industries has propelled several cloud stocks to outperform the broader markets. Among them, nCino (NASDAQ:NCNO), valued at $3.46 billion by market cap, stands out as a cloud-based company with significant potential. Let’s delve into what Wall Street predicts for NCNO stock.
An Insight into nCino
nCino operates as a cloud-based Software-as-a-Service (SaaS) provider, offering software applications to financial institutions globally. Its flagship product, the nCino Bank Operating System, provides secure, cloud-based solutions to banks, encompassing functionalities like customer relationship management (CRM), loan origination, account opening, and credit analysis.
The company’s nCino IQ application suite employs artificial intelligence (AI) and machine learning technologies to offer automation and insights into enterprise operations. Additionally, nCino offers SimpleNexus, facilitating simplified homeownership processes through internet-enabled devices.
Performance in Fiscal Q3 2024
In fiscal Q3 2024 (ended January), nCino reported revenue of $121.9 million, marking a 16% year-over-year increase. Subscription sales surged to $104.8 million, up 19% compared to the previous year. Despite facing industry-wide challenges, nCino managed to enhance its gross margins and exceeded earnings consensus.
Benefiting from the high operating leverage typical of tech stocks, nCino boosted its profit margins significantly, closing Q3 with a non-operating margin of 17%, up by 1,400 basis points from the previous year.
During the quarter, nCino expanded its clientele, securing its first enterprise bank for consumer lending and adding a major $200 billion U.S. bank as its largest customer. Moreover, it inked an expansion deal with a regional bank holding assets worth $35 billion. Notably, nCino also secured its largest customer in Japan, Yamaguchi Financial, managing assets worth $150 billion.
Despite its robust performance, the stock experienced a downturn post-Q3 results due to missing operating income and free cash flow consensus estimates. Light revenue guidance and delayed deals attributed to banks evaluating expense budgets in a challenging macro environment further dampened market sentiment.
Future Outlook and Target Price
For fiscal Q4 2024, nCino anticipates revenue in the range of $123.5 million to $125.5 million, with subscription sales projected between $105.5 million and $107.5 million. The guidance assumes a 15% growth in subscription sales at the midpoint.
Additionally, the company forecasts non-operating income between $15 million and $16 million, with adjusted earnings per share ranging from $0.11 to $0.13.
Among the 14 analysts covering NCNO, the consensus rating stands at “moderate buy,” with an average target price of $35, indicating a potential upside of 13.5%. Notably, Piper Sandler analyst Brent Bracelin recently raised his target price to $42.00, implying a 36% upside from current levels, endorsing a “buy” rating for nCino stock.
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