What Happened:
Shares of bank software company nCino (NASDAQ:NCNO) fell 14.9% in the pre-market session after the company reported second-quarter earnings results. Its revenue guidance for next quarter missed analysts' expectations, and its gross margin decreased. Investors are likely concerned that the revenue guidance wasn't revised upward, despite the topline beat recorded during the quarter. In addition, the CEO highlighted macroeconomic challenges in the U.S. and international markets. Overall, this was a weaker quarter.
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What is the market telling us:
nCino’s shares are very volatile and over the last year have had 10 moves greater than 5%. But moves this big are very rare even for nCino and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock gained 20.3% on the news that the company reported fourth quarter results with revenue in line with analysts' expectations, but its operating income, EPS, and free cash flow significantly beat, painting a picture of stronger profitability. The company's full-year 2024 guidance confirmed this, as its forecasted EPS blew past Wall Street's projections.
During the quarter, nCino's President and Chief Revenue Officer, Josh Glover, announced he would be stepping down to join another company. Furthermore, on March 18, 2024, nCino announced it would acquire DocFox, a solution provider automating onboarding experiences for commercial and business banking clients. The terms of the deal were not disclosed. DocFox was founded in 2016 and has over 450 global customers.
Overall, it was a strong quarter for the company. Following the results, Morgan Stanley upgraded the stock's rating from Underweight (Sell) to Equal Weight (Neutral) and raised the price target from $24 to $27.
nCino is down 13% since the beginning of the year, and at $30.18 per share it is trading 19.3% below its 52-week high of $37.38 from March 2024. Investors who bought $1,000 worth of nCino’s shares at the IPO in July 2020 would now be looking at an investment worth $329.29.
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