Shares of nCino, Inc. (NASDAQ: NCNO) experienced a significant surge of 24.5% during Friday’s afternoon session. The remarkable increase came in response to rumors suggesting private equity firms’ interest in acquiring the company. In light of this speculation, nCino has initiated a review of potential sale options and is considering establishing a special committee to assess the expressions of interest.
Insight Partners, a private equity firm that currently holds around 35% of nCino, has yet to make a final decision on whether to participate in a potential deal or choose to cash out, according to Reuters.
This acquisition, particularly in the Software-as-a-Service (SaaS) sector, signals positive sentiment for the industry as a whole, demonstrating favorable views regarding both fundamental aspects and valuation. After the initial surge, nCino’s shares settled at $32.50, reflecting a 2.44% increase from the previous closing price.
Significant News, But No Fundamental Shift
nCino’s shares have displayed considerable volatility over the past year, with 42 moves greater than 5%. In light of this context, Friday’s jump indicates that the market considers this news to be significant but not enough to fundamentally alter its perception of the business.
The most recent substantial movement occurred 16 days ago when the stock experienced a 12.5% decline after the company reported first-quarter revenue surpassing analysts’ expectations. Earnings per share also exceeded projections, while free cash flow demonstrated a noteworthy improvement, contrary to the trend of growing cash burn observed in the previous two quarters.
However, the guidance provided was underwhelming and influenced the market narrative. Revenue and subscription revenue guidance for the next quarter fell below consensus, while full-year revenue guidance was roughly in line. Similarly, earnings per share guidance for both the next quarter and the full year met market expectations. Overall, it was a solid quarter for the company, but the guidance left investors wanting more.
Since the start of the year, nCino’s shares have risen by 23.5%. However, at $32.50 per share, the stock still trades 16.8% below its 52-week high of $39.08 recorded in August 2022. Investors who initially purchased $1,000 worth of nCino shares during the July 2020 IPO would currently hold an investment valued at $356.48.
