Challenges in Mortgage Segment Hurt nCino, Analyst Downgrades Stock

Piper Sandler analyst Brent A. Bracelin downgraded nCino, Inc. NCNO to Neutral from Overweight, with a price forecast of $38.

The company reported total revenues for the third quarter of $138.8 million, a 14% increase from the previous year. Subscription revenues also grew 14% year-over-year to $119.9 million, with a non-GAAP operating margin of 20%, up approximately 350 basis points.

After the results, Bracelin reduced the 2025 revenue outlook by about $20 million due to lower mortgage and core assumptions, partly offset by FullCircl revenue.

Despite the AMC sell-off and a portion of recent gains being lost, the analyst lowered the rating but will monitor cross-sell momentum and the potential recovery in mortgage volumes in the second half of 2025.

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The analyst noted that unexpected churn in the mortgage segment (15% of sales) outweighed a $6 million quarter-over-quarter revenue increase. This was the largest sequential revenue gain in over two years.

The analyst highlighted that strong cost management, even with the integration of DocFox, led to a significant margin improvement, reaching a record 20.2%, which was much higher than the previous quarter’s 14.6%, first quarter’s 19.1% and the mid-point guidance of 15.7%.

The analyst expects fourth-quarter mortgage segment growth to slow to 3.5% from 16% last quarter.

This slower growth for a $74 million product category lowers expectations for a recovery next year until mortgage volumes significantly improve, Bracelin adds.

The analyst revised FY25 revenue estimates down to $539.8 million from $541.5 million, but raised the EPS estimate to 72 cents from 69 cents.

Price Action: NCNO shares are trading lower by 12.10% to $37.36 at the last check Thursday.

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