Why nCino (NCNO) Shares Are Falling Today

Radek Strnad /
2023/11/30 11:17 am EST

What Happened:

Shares of maker of operating system for banks nCino (NASDAQ:NCNO) fell 6.7% in the morning session after the company reported third quarter results and provided revenue guidance for the next quarter that fell below Wall Street's expectations, though revenue narrowly exceeded expectations during the quarter. In addition, GAAP operating income and free cash flow missed. Management acknowledged various challenges, particularly with enterprise banks. They noted that some deals were delayed into the next quarter as customers assessed their budgets and the potential effects of a changing interest rate environment on their business. On the other hand, gross margin improved while EPS came in ahead of Consensus. Overall, it was a weaker quarter for the company, highlighting broader macroeconomic difficulties.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy nCino? Access our full analysis report here, it's free.

What is the market telling us:

nCino's shares are very volatile and over the last year have had 23 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 12.5% on the news that the company reported first-quarter revenue that topped analysts' expectations. Earnings per share also beat convincingly. In addition, free cash flow improved significantly, bucking the trend of growing cash burn observed in the last two quarters. However, the guidance was underwhelming and drove the narrative. Revenue and subscription revenue guidance for the next quarter were below Consensus. The full-year revenue guidance was roughly in line. Similarly, earnings per share guidance for both the next quarter and the full year were in line with market expectations. Overall, it was a solid quarter for the company but the guidance left more to be desired.

nCino is up 5% since the beginning of the year, but at $27.75 per share it is still trading 16.9% below its 52-week high of $33.41 from September 2023. Investors who bought $1,000 worth of nCino's shares at the IPO in July 2020 would now be looking at an investment worth $302.98.

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