Alkami, Q2 Holdings Tapped As Top Picks By Analyst In $10 Billion Digital Banking Market

JPMorgan analyst Ella Smith initiated coverage on Q2 Holdings (NYSE:QTWO) and nCino (NASDAQ:NCNO) and assumed lead analyst coverage of Alkami Technology (NASDAQ:ALKT) on Wednesday.

Smith’s investment preferences have Alkami Technology as Overweight, Q2 Holdings as Overweight and nCino as Neutral.

The analyst noted that the digital banking space is an attractive investment arena.  

Also Read: Alkami Growth Accelerates With MANTL Deal, Boosts Digital Banking And Cross-Sell Potential: Analyst

Smith said Alkami Technology and Q2 Holdings are modernizing customer-facing software for credit unions and regional banks. These companies enjoy high customer retention and five-to-seven-year contract lengths, which support revenue visibility, according to the analyst.

Smith noted that the monetization model is defensive. It is based on the number of bank accounts on the respective platform and the number of products a bank subscribes to.

As the analyst notes, nCino was born out of a bank and is more focused on providing cloud-based banking software solutions to financial institutions.

The opportunity to make banks more efficient is seemingly limitless.

Smith noted idiosyncratic factors that have kept her on the sidelines for now, relative to broader vertical SaaS.

The analyst preferred Alkami Technology and Q2 Holdings over nCino because she particularly liked the dynamics in the digital banking industry. She noted that these two companies offer the premier platform solutions in a ~$10 billion market, of which Alkami Technology has less than 5% and Q2 Holdings less than 10%.

Smith estimated that up to 60% of the market is an addressable opportunity for Alkami Technology and Q2 Holdings, creating an attractive opportunity to displace legacy competition.

The analyst also noted that Alkami Technology is in the rarefied territory, with organic revenue growth of over 20% but trading at six times EV/Sales for 2026E.

This cohort offers what Smith appreciated most about vertical software, including durable revenue growth, margin expansion runways, high customer retention, strong cross-sell prospects and consolidated market structures. At the same time, this cohort is heavily discounted to his broader vertical software coverage.

Price Actions: ALKT stock is up 5.26% at $28.24; QTWO is up 3.56% at $89.07; and NCNO is down 0.44% at $26.96 at publication on Wednesday.

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