Stock Analysis

nCino, Inc. (NASDAQ:NCNO) Just Reported Earnings, And Analysts Cut Their Target Price

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nCino, Inc. (NASDAQ:NCNO) just released its annual report and things are looking bullish. Revenues and losses per share both beat expectations, with revenues of US$274m leading estimates by 2.1%. Statutory losses were somewhat smaller thanthe analysts expected, coming in at US$0.51 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for nCino

NasdaqGS:NCNO Earnings and Revenue Growth April 4th 2022

Taking into account the latest results, the current consensus from nCino's ten analysts is for revenues of US$398.7m in 2023, which would reflect a substantial 46% increase on its sales over the past 12 months. Losses are forecast to balloon 56% to US$0.70 per share. Before this earnings announcement, the analysts had been modelling revenues of US$331.7m and losses of US$0.39 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts significantly increasing their revenue forecasts while also expecting losses per share to increase. It looks like the revenue growth will not be achieved without incremental costs.

Spiting the revenue upgrading, the average price target fell 21% to US$58.22, clearly signalling that higher forecast losses are a valuation concern. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values nCino at US$80.00 per share, while the most bearish prices it at US$47.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await nCino shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting nCino's growth to accelerate, with the forecast 46% annualised growth to the end of 2023 ranking favourably alongside historical growth of 32% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect nCino to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of nCino's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple nCino analysts - going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for nCino that you should be aware of.

Valuation is complex, but we're helping make it simple.

Find out whether nCino is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.