IBD Stock Analysis
- Shares consolidating above earlier cup base, where buy point was 363.05
- Alternative buy point available for aggressive investors now stands at 396.25
- Relative Strength Rating at 93 out best-possible 99; Composite Rating at 99
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:15PM EDT on
ServiceNow (NOW) is the IBD Stock of the Day as the enterprise software maker forges an alternative entry point for aggressive investors. ServiceNow stock has gained 35% in 2020 despite Covid-19 and some 75% since announcing a new chief executive in late October.
Santa Clara, Calif.-based ServiceNow’s new alternative entry is 396.25. That’s just above a recent high. Shares were down 2% in afternoon action Wednesday to 384.99.
The company makes information-technology service management software. Its self-service tech portal enables company employees to access administrative and workflow tools. It has expanded into software for human resources, customer service management, or CSM, and security.
ServiceNow on Wednesday hosted its online Knowledge 2020 Digital Experience event. There, it showcased Walt Disney‘s (DIS) new streaming service as a CSM customer. Also, ServiceNow rolled out new products for telecommunications and financial services. It provided more details about its health care and life science industry strategy.
ServiceNow stock popped 9% after the company reported better-than-expected first-quarter earnings on April 29. The stock has been consolidating above its earlier cup base. Its earlier entry point was 363.05 and it’s extended from there.
However, investors may want to put ServiceNow stock on a watchlist.
ServiceNow’s Relative Strength Rating is 93 out of a possible 99. The best stocks own ratings above 80.
Enterprise Software Stocks Gain On Recurring Revenue
ServiceNow stock is in a solid sector. The IBD Computer-Software Enterprise group ranks No. 2 out of 197 groups and Service Now ranks first in that group.
Many enterprise software stocks have outperformed amid the coronavirus emergency.
However, the coronavirus shutdown is expected to have a greater impact on July-August quarter earnings.
Some investors focus on recurring revenue amid the slowing U.S. economy. In the first quarter, ServiceNow said subscription revenue rose 34% to $995 million, topping estimates of $978.4 million.
“Cash flow is king in times of uncertainty,” said Canaccord Genuity analyst David Hynes in a report on ServiceNow’s earnings.
Software Growth Stocks Gain On Digital Transformation
During the March quarter, ServiceNow said it closed 37 transactions with more than $1 million in net new annual contract value, representing 48% year-over-year growth.
Commenting on ServiceNow’s quarter, UBS analyst Jennifer Lowe said in a report to clients: “Businesses will still invest in technology projects seen as core to their long-term success.”
In addition, she added that digital transformation and workflow automation remain a priority.
Further, ServiceNow stock holds an Accumulation/Distribution Rating of B-, according to IBD Stock Checkup.
The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
ServiceNow Stock: A CEO Change
In late October, ServiceNow unexpectedly announced that CEO John Donahoe was leaving to lead Nike. But ServiceNow stock has been on a roll since the company brought in Bill McDermott as chief executive.
McDermott formerly led software giant SAP (SAP). At SAP, McDermott had a track record of making acquisitions.
Yet ServiceNow has avoided a buying binge thus far, though it has made some purchases. In January, ServiceNow acquired two artificial-intelligence companies, Passage AI and Loom Systems.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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