Buy This Cloud-Based Business Services Stock After Earnings On Strong Growth?
Zacks Investment Research | Feb 05, 2020 07:40AM ET
ServiceNow (NYSE:NOW) provides cloud-based services and solutions to its over 6,200 enterprise customers, on everything from IT to employee and customer workflows. NOW posted stronger-than-projected Q4 2019 results on January 29. Analysts have since raised their fiscal 2020 and 2021 earnings estimates for the fast-growing, cloud-focused business services firm.
ServiceNow’s Quick Pitch
ServiceNow was founded in 2004 and went public in 2012. The Santa Clara, California-based firm grabbed the No. 3 spot on Fortune’s Future 50 list of global companies “with the best prospects for long-term growth” in both 2019 and 2018. This put NOW ahead of the likes of Salesforce (NYSE:CRM) , Netflix (NASDAQ:NFLX) , Vertex Pharmaceuticals (NASDAQ:VRTX) , and many others.
ServiceNow last summer expanded its partnership with Microsoft (NASDAQ:MSFT) . The updated relationship with Microsoft will help ServiceNow sell to highly regulated industries and see it house its full SaaS offerings on MSFT’s Azure cloud, which competes directly against Amazon (NASDAQ:AMZN) .
More recently, the cloud-centered digital workflows firm was added to the S&P 500 index in November. And new CEO Bill McDermott, who took over in mid-November, bought $1 million worth of NOW shares. This appeared to be a solid vote of confidence in ServiceNow and a possible sign that the CEO might have thought NOW stock was undervalued.
Investors can see from the nearby chart that NOW stock has been on an impressive run. Not only are shares up a whopping 1,330% since their debut, the stock has soared roughly 290% in the last three years.
Shares of ServiceNow have also climbed over 10% since it reported on January 29 and are now up 45% in the last three months to rest at new highs.
Outlook
In the fourth quarter, NOW’s subscription revenue surged 35%. Meanwhile, it closed the period with 892 total customers with over $1 million in annual contract value, which marked 32% growth.
Our Zacks estimates call for the company’s fiscal 2020 revenues to climb 29% to $4.45 billion, with FY21 expected to jump another 26.2% higher to reach $5.62 billion. These would both mark the continuation of 2019’s 33% top-line expansion.
On top of that, ServiceNow’s adjusted earnings are projected to soar over 29% in both 2020 and 2021. “Looking ahead, we remain focused on driving sustainable top-line growth as we look to scale our business to $10 billion in revenue and beyond,” CFO Gina Mastantuono said in prepared remarks.
Get The News You Want
Bottom Line
ServiceNow is currently a Zacks Rank #3 (Hold) that also holds an “A” grade for Growth in our Style Scores system. Overall, NOW stock appears to be worth considering at the moment, as part of the continued digital transformation of businesses big and small.
Breakout Biotech Stocks with Triple-Digit Profit PotentialThe biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.