Stock (Symbol)

ServiceNow (NOW)

Stock Price

$154

Sector

Technology

Data is as of

February 19, 2018

Expected to Report

Apr 24

Company Description

ServiceNow, Inc. is provider of enterprise cloud computing solutions that define, structure, manage and automate services for global enterprises. The Company offers a set of cloud-based services that automate workflow within and between departments in an enterprise. It provides workflow solutions, and focuses on service management for customer support, human resources, security operations and other enterprise departments. Source: Thomson Financial

Sharek’s Take

Software stock ServiceNow (NOW) is on a roll right now, as profits, sales and subscription revenue grew 46%, 42% and 44% respectively last qtr. NOW is one of the fastest growing software stocks to own, and reminds me a lot of Salesforce.com, but the recent surge in the stock price has zapped much of the upside I envisioned for 2018. ServiceNow is a cloud-based provider of software to businesses. When it began in 2004, the company started with IT help-desk software then expanded into customer service, and is now developing a slew of other apps in HR and security. ServiceNow has 500 customers doing more than $1 million in average contract values — 43% more than it had a year ago. Its renewal rate is consistently over 97%. The company is a competitor to Salesforce, but NOW is growing faster with profits up at least 70% the last 2 years, double Salesforce’s. 2018’s estimate is for profits to rise 67%, but this includes some tax gains. ServiceNow has an excellent Est. LTG of 52% a year and with profits expected to climb close to 70% this year the stock is hot. A little too hot. NOW is extended in the ten-year chart, and with a P/E of 77 I feel investors would be better off waiting to make any additional purchases. ServiceNow stock needs to simmer down some.

One Year Chart

Profits rose 46% last qtr on a 42% increase in sales. Profits met analyst estimates. Qtrly profit Estimates of 50% , 91%, 53% and 77%. will likely keep this stock timely for the next year, but again the stock is a bit extended here and needs a rest. The P/E increased from 68 last qtr to 77 this qtr. Excellent Est. LTG of 56% per year.

Fair Value

This stock shot right up to my 2018 Fair Value, but notice the upside to 2019 is 43%. That’s great. So I so love the stock, but those charts make me cautious.

Bottom Line

ServiceNow is one of the world’s top software companies, and the company is clicking on all cylinders right now. But this ten-year chart has too high of a slope right now, thus I recommend investors be cautious when buying. Long-term I feel all these business software stocks will be acquired by the largest players in the industry. That’s fine, we own those stocks too. 😉 NOW ranks 19th in the Growth Portfolio Power Rankings.