On Monday, Barclays (LON:BARC) announced an upgrade of nCino Inc. (NASDAQ:NCNO) stock from Equalweight to Overweight, establishing a price target of $44.00. The target aligns with broader analyst sentiment, as InvestingPro data shows consensus targets ranging from $38 to $45. The analyst highlighted three primary reasons for the positive reassessment of the cloud-based banking software company's outlook.
Firstly, the analyst expressed increased confidence in the improvements for nCino's bank customers, which could lead to higher commercial loan volumes. Commercial loan origination software constitutes approximately 75% of nCino's business. The company's revenue grew by 13.2% in the last twelve months, with InvestingPro analysis indicating strong growth potential ahead.
Additionally, the firm anticipates continued double-digit growth in mortgage originations, which currently represent about 15% of nCino's revenue. Barclays also noted an increase in spending by banks in various verticals, as indicated by Gartner (NYSE:IT) data.
The second reason for the upgrade is nCino's new platform pricing model, set to become the standard for all new business from February 1, 2025. This change is expected to accelerate revenue recognition from new deals and provide greater exposure to volume improvements. Barclays believes that this faster time to revenue supports their estimates and could signify that the company has experienced its last significant reduction.
Lastly, Barclays sees nCino trading at a discount compared to other vertical SaaS leaders at approximately 6 times CY26E EV/Sales. The analyst suggests there is potential for both an increase in financial projections and multiple expansion in 2025.
Barclay's analysis implies a belief in nCino's growth potential and its ability to capitalize on market opportunities, as the company prepares to implement its new pricing strategy in the coming year. The revised price target reflects Barclays' expectations for nCino's performance and its positioning in the software-as-a-service (SaaS) sector.
In other recent news, nCino, a cloud banking software provider, has announced modifications to employment agreements for its top executives to align with market practices. The company, which reported robust revenue growth of 13% year-over-year, has also been the subject of various analyst firms' attention due to its recent financial performance.
UBS initiated coverage on nCino with a Buy rating, projecting a compound annual growth rate of about 15% through fiscal year 2028.
Keefe, Bruyette & Woods maintained an Outperform rating on nCino's stock, despite reducing the price target to $44.00 from the previous $49.00 following the company's third-quarter earnings.
Baird adjusted its outlook on nCino, lowering its price target to $42 while maintaining a Neutral stance. This change was influenced by nCino's recent financial performance, which showed a revenue increase of 14% and an improvement in EBIT margins.
Stephens raised its price target on nCino to $38.00, up from the previous target of $35.00, maintaining an Equal Weight rating on the stock. This adjustment followed nCino's third-quarter earnings, which surpassed expectations but was accompanied by a reduction in the company's full-year revenue guidance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.