On Thursday, Stephens, a financial services firm, raised its price target on shares of nCino Inc. (NASDAQ:NCNO) to $38.00, up from the previous target of $35.00. The stock, currently trading at $42.50 and near its 52-week high of $43.20, has shown remarkable momentum with a 43% gain over the past six months.
According to InvestingPro analysis, the stock is currently trading close to its Fair Value. The firm maintained an Equal Weight rating on the stock. The adjustment follows nCino's third-quarter earnings, which surpassed expectations, but was accompanied by a reduction in the company's full-year revenue guidance. This revision implies an approximate 10% organic growth in the fourth quarter.
nCino's reaffirmation of its target for 50% net bookings growth for the fiscal year was noted by the firm, but shares are anticipated to face pressure due to the uncertainty surrounding the fiscal year 2026 outlook and the expected 16%-17% organic growth. While the company maintains a moderate debt level and achieved revenue growth of 13.64% in the last twelve months, it remains unprofitable with a negative EPS of $0.26.
The lowered guidance was attributed to higher-than-anticipated mortgage churn, driven by mergers and acquisitions in the Independent (LON:IOG) Mortgage Bank (IMB) market, and a conservative stance regarding the interest rate environment. Management indicated that a 20% volume increase could result in a 10% growth within the volume-based customer base.
Despite these challenges, nCino's performance in other areas was strong. Excluding the mortgage sector, domestic bookings exceeded expectations. Internationally, nCino closed its largest deal to date in Japan and secured an expansion agreement with Norway's largest bank. These achievements highlight nCino's continued success in the global market.
The long-term positive outlook for nCino remains unchanged, according to Stephens. The company is seen as well-positioned to benefit from the growing focus on optimization projects for middle and back-office operations. With a solid financial health score from InvestingPro, which offers comprehensive analysis through its Pro Research Reports covering 1,400+ US stocks, nCino shows promise despite current challenges. However, the current uncertainties in the mortgage sector and potential delays in international expansion are considered near-term obstacles to the company's performance.
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