On Thursday, Piper Sandler adjusted its outlook on nCino Inc. (NASDAQ:NCNO), a cloud banking software provider, by reducing the stock's price target to $38.00 from the previous $42.00. Despite this change, the firm maintained its Overweight rating on the company's shares.
The revision follows nCino's recent financial performance, which showcased solid execution and a promising start to Fiscal Year 2025. The company's strategy of cross-selling new products has been effective, supporting sustained double-digit growth in the top line. Notably, a series of commercial renewal expansions played a significant role in accelerating the committed remaining performance obligation (cRPO) backlog, marking a return to double-digit growth for the first time in twelve months.
nCino's mortgage suite, which accounts for approximately 15-16% of its sales, continues to face macroeconomic headwinds. However, signs of stabilization in the commercial and retail segments are expected to help the company maintain low double-digit growth into the latter half of the year. Piper Sandler also noted an uptick in earnings per share (EPS) due to improved operating leverage, with non-GAAP operating margins rising to 19%, a significant increase from 10% in the previous year.
InvestingPro Insights
Piper Sandler's recent adjustment of nCino Inc.'s (NASDAQ:NCNO) price target comes at a time when the company is demonstrating potential for growth despite not being profitable over the last twelve months. According to InvestingPro data, nCino has a market capitalization of $3.45 billion and has shown a revenue growth of 16.71% over the last twelve months as of Q4 2024. This growth is aligned with the company's strategy of cross-selling new products, which Piper Sandler recognizes as a driver for sustained top-line expansion.
While nCino is trading at a high revenue valuation multiple, InvestingPro Tips suggest that net income is expected to grow this year, with analysts predicting the company will be profitable this year. Additionally, 10 analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment in the financial community. Despite the absence of dividend payments, which aligns with the company's growth-focused reinvestment strategy, the company operates with a moderate level of debt, which could provide some financial flexibility as it navigates the current economic landscape.
For investors seeking a deeper analysis, InvestingPro offers even more tips and a fair value estimate of $32.77, which is below Piper Sandler's new target but suggests some potential upside from the previous close price of $30.15. To access additional insights, investors can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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