What Happened:
Shares of maker of operating system for banks nCino (NASDAQ:NCNO) jumped 24.5% in the afternoon session after speculation that there is takeover interest from private equity firms, which prompted the company to explore potential sale options and consider forming a special committee to review the expressions of interest. According to Reuters, the private equity firm Insight Partners, which holds around 35% of nCino, has not made a final decision on whether to participate in a potential deal or opt for cashing out. An acquisition in SaaS could be a good signal for the whole industry, as it shows there are constructive views on both fundamentals and valuation. After the initial pop the shares cooled down to $32.50, up 2.44% from previous close.
What is the market telling us:
nCino's shares are quite volatile and over the last year have had 42 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 previous big move was 16 days 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 23.5% since the beginning of the year, but at $32.50 per share it is still trading 16.8% below its 52-week high of $39.08 from August 2022. Investors who bought $1,000 worth of nCino's shares at the IPO in July 2020 would now be looking at an investment worth $356.48.
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