Wednesday, Needham maintained its Buy rating on nCino Inc. (NASDAQ:NCNO) stock but lowered the price target to $40 from $42. This adjustment follows nCino's second quarter fiscal year 2025 financial results, which surpassed expectations due to a 14% growth in subscription revenue and effective expense management.
Despite these strong results, a quarter-over-quarter dip in Remaining Performance Obligations (RPO) by 2.6% prompted a roughly 10% decline in the company's share price after hours.
nCino reported the signing of its largest portfolio analytics bank customer during the quarter, along with the extension of a relationship with its most significant UK client. The company also continued to expand its customer base and cross-sell products. Although the RPO showed a year-over-year increase of 12%, the sequential decrease was highlighted as a primary factor for the reduced stock price.
The analyst from Needham noted that the first quarter of fiscal year 2025 was a record-breaking sales period for nCino, and bookings can vary from one quarter to the next. Despite the recent dip in RPO, the firm believes nCino's execution remains robust, as evidenced by the company's positive outlook and the pace of deal wins.
The recommendation to buy on the observed weakness reflects Needham's confidence in nCino's ongoing performance and potential for recovery. The firm's analysts reiterate their positive stance on the stock, albeit with a slightly adjusted price target, suggesting that the current dip in share value presents a buying opportunity for investors.
In other recent news, nCino Inc. reported second-quarter financial results for fiscal year 2025, surpassing consensus expectations in both revenue and profitability, driven by a notable subscription revenue beat. However, the company's third-quarter guidance fell below analyst expectations.
Despite this, Goldman Sachs (NYSE:GS) reiterated its Buy rating on nCino, emphasizing a 17% year-over-year increase in net new Annual Contract Value bookings and a 36% growth in gross new U.S. ACV bookings for the first half of the fiscal year.
The firm also highlighted potential catalysts for nCino, including easing churn rates, a more favorable mortgage environment, the monetization of new product cycles, and robust market spending. nCino's CEO, Pierre Naudé, expressed a positive outlook for the second half of the year, despite ongoing macro-economic challenges. The company reaffirmed its full fiscal year 2025 revenue guidance of $538.5-544.5 million.
Despite missing the consensus estimate for adjusted earnings per share, nCino did report a 13% increase in revenue year-over-year, exceeding expectations slightly at $132.4 million. The company's third quarter revenue forecast of $136-138 million was below the consensus estimate of $138.6 million.
Despite these challenges, nCino experienced a 14% year-over-year growth in subscription revenue, reaching $113.9 million. The company ended the quarter with $126.8 million in cash and equivalents, following a $15 million repayment on its revolving credit facility.
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