nCino's path to profits: Niche fintech with strong prospects

January 22, 2024 at 07:18 AM EST

nCino stock price

You’ve probably noticed: The banking industry is moving away from branch visits, and toward “there’s an app for that.”

Not only are consumers using apps like PayPal Holdings Inc. (NASDAQ: PYPL) and PayPal-owned Venmo, but people are also using their own bank’s apps for more and more transactions.

nCino Inc. (NASDAQ: NCNO) is the developer of the technologies behind some of those cloud bank apps.

The stock is currently in a buy zone, following a December announcement that nCino had expanded its partnership with Salesforce Inc. (NYSE: CRM).

Expanding connectivity to Salesforce AI tools

The renewed agreement with Salesforce will expand nCino’s connectivity to Salesforce platform tools including the CRM database, powered by AI and automation, as well as Salesforce’s Financial Services Cloud.

“These innovations will empower financial institutions utilizing nCino and Salesforce to further modernize customer experiences like onboarding, loan origination, deposit account opening, and portfolio management,” the companies said in a news release.

The companies also said the expanded agreement includes updated commercial terms that should improve nCino’s subscription gross margins.

If you look at nCino’s chart, you’ll see the stock retreating to its 50-day moving average and finding support there.

Moving-average support is a positive technical indicator as it shows that big investors aren’t unloading a stock’s shares, but perhaps taking some profits after a run-up.

nCino stock cleared cup-shaped pattern

That’s exactly what happened with nCino; the stock broke out of a cup-shaped base in late December, and rallied to a high of $35.83 on January 11.

There was no company-specific news, and no analyst actions, so the selling after January 11 has the look of one, or possibly more, institutions paring their position after a substantial rally that began in late November.

nCino stock rallied 30% between November 30 and January 11, offering an almost picture-perfect opportunity for investors to pocket some profits.

In the January 19 session, the stock fell again, but stopped just shy of its 50-day average, and saw some buying mid-session, likely a sign that a big investor spotted a buy opportunity at an attractive valuation.

It’s not unusual for institutions to swoop in and pick up some shares as a stock nears its moving average. That action reinforces the support level. Keep in mind: Much of that is algorithm or program-driven these days, although financial institutions still rely on the human element, as well.

Helping financial institutions modernize and innovate

nCino’s Bank Operating System is a software-as-a-service product to help financial institutions modernize and innovate. As of 2023, it counted more than 1,850 financial institutions of all sizes. Its customer base includes global, enterprise, regional and community banks; credit unions; startup financial companies; and independent mortgage banks.

In other words, its clientele spans the universe of financial institutions.

nCino is expected to post a profit for the first time this year, with analysts eyeing 34% earnings growth in 2025. The company has a three-year revenue growth rate of a very robust 38%.

Within its specific niche among technology stocks within the financial software industry, nCino is a top price mover, along with MoneyLion Inc. (NYSE: ML).

Partnered with Salesforce since inception

While MoneyLion and companies like SoFi Technologies Inc. (NASDAQ: SOFI) are primarily consumer-focused, nCino takes a business-to-business approach. Its banking customers are not fintech developers, so they hire nCino to handle those tasks for them.

From nCino’s inception, it built its Bank Operating System on the Salesforce platform to leverage the database giant’s “global infrastructure, reliability, and scalability,” according to the company.

Salesforce Ventures, a venture capital affiliate of Salesforce, made investments in nCino several times between 2014 and 2019. As of January 31, 2023, Salesforce owned less than 5% of nCino’s common stock; watch for that number to be updated in the upcoming annual report.

The deal works two ways: When nCino sells a client onboarding, loan origination, and/or deposit account opening applications, it includes a subscription to the underlying Salesforce platform and pays Salesforce a subscription fee. In exchange, Salesforce provides the hosting infrastructure and data center for these applications, as well as configuration, reporting, and other functionality within the Salesforce platform.

Some of nCino’s operations are also built using Amazon.com Inc.’s (NASDAQ: AMZN) Web services platform.

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nCino's path to profits: Niche fintech with strong prospects

Expanding connectivity to Salesforce AI tools

nCino stock cleared cup-shaped pattern

Helping financial institutions modernize and innovate

Partnered with Salesforce since inception

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