On Thursday, Baird adjusted its outlook on nCino Inc. (NASDAQ:NCNO), a cloud banking software provider, by lowering its price target to $42 from the previous $43. The firm maintained its Neutral stance on the stock.
According to InvestingPro data, the company, currently valued at $4.91 billion, is trading near its 52-week high of $43.2, with analysis suggesting the stock is fairly valued at current levels. The revision follows nCino's recent financial performance, which showed a revenue increase of 14%, with approximately 12-13% attributed to organic growth and a 1% upside.
The company's EBIT margins also improved, reaching 20% compared to 17% year-over-year, surpassing the consensus estimate of 16%. InvestingPro analysis reveals a robust gross margin of 60.05% and impressive six-month returns of 43.48%, though the company remains unprofitable over the last twelve months.
The analyst from Baird highlighted that nCino's core US market continues to demonstrate robustness, and its international segment has experienced significant deal activity as expected. However, the mortgage sector presented challenges, with nCino's management recognizing an increase in customer churn and a subdued recovery outlook for the fourth quarter, as interest rates remain high.
The softer mortgage outlook has been factored into the updated forecast for the fourth fiscal quarter, with projected revenue falling 5% below the consensus after accounting for incremental mergers and acquisitions.
Despite this, the upside from the third fiscal quarter's EBIT has been carried over into the fiscal year 2025 guidance, with margin projections now at 18% versus the previous year's 13%, which is also higher than the consensus of 16%.
nCino's financial update indicates a mixed picture, with strong performance in certain areas being dampened by the less favorable conditions in the mortgage industry. The company's forward-looking statements have been adjusted accordingly to reflect these market realities.
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