On Thursday, Needham reaffirmed its positive stance on nCino Inc. (NASDAQ:NCNO), increasing the price target to $45 from the previous $40, while maintaining a Buy rating on the stock. The cloud banking software provider, currently valued at $4.91 billion, is trading near its 52-week high of $43.20.
The adjustment follows nCino's third-quarter fiscal year 2025 performance, which surpassed expectations due to robust subscription revenue growth and effective cost management. According to InvestingPro analysis, the stock is currently trading at Fair Value.
The cloud banking company reported a significant increase in its Remaining Performance Obligations (RPO), which rose by 5.3% quarter-over-quarter and 19.4% year-over-year. This growth was attributed to successful sales execution and client acquisitions in both U.S. and international markets.
The company's revenue has grown 13.64% over the last twelve months, maintaining a healthy gross profit margin of 60.05%. In addition, nCino's recent acquisition of UK-based FullCircl, which enhances its client onboarding capabilities and complements the earlier acquisition of DocFox, was highlighted as a strategic move that broadens the company's serviceable addressable market.
Despite these positive developments, nCino's fourth-quarter revenue guidance came in below expectations. The company anticipates that challenges in the mortgage sector, including higher churn and lower volumes, will temper the contributions from its recent mergers and acquisitions.
Following this guidance, nCino's stock experienced a drop of more than 14% in after-hours trading. For deeper insights into nCino's financial health and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company's performance metrics and future outlook.
Needham analysts view the mortgage sector challenges as temporary and consider the market's reaction to the stock as an overreaction. The firm stands by its Buy rating and sees the current dip in share price as an opportunity, signaling confidence in nCino's long-term growth trajectory. This optimism is supported by the stock's strong performance, with a 43.48% return over the past six months.
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