ServiceNow Stock (NOW): Should I Buy It Now?

By Amit Chowdhry ● May 20, 2020
  • Should you buy ServiceNow stock (NYSE:NOW)? Here is some information to help you decide.

Cloud computing platform ServiceNow Inc (NYSE:NOW) has been one of the best performing tech stocks over the last few years. In the last five years, the stock surged nearly 400%. And year-to-date, ServiceNow is up a about 35.62% despite the economic crisis.

On April 29, ServiceNow reported its first-quarter 2020 results. For the quarter, subscription revenues were $995 million — which represented 34% year-over-year growth. And for the quarter, ServiceNow closed 37 transactions with over $1 million in net new annual contract value (ACV) — which represented 48% year-over-year growth. The deals included the company’s second-largest new customer transaction ever along with the Asia Pacific region’s largest customer service management deal ever. Now ServiceNow has 933 total customers with more than $1 million in ACV, representing 30% year-over-year growth in customers.

“This pandemic has allowed us to engage our customers in new ways, enabling them to focus on their most critical workflows,” said ServiceNow CEO Bill McDermott in the earnings announcement. “Businesses are splitting apart old value chains and reassembling them in end-to-end, mobile-first experiences on the Now Platform. Our Q1 results are a direct reflection of ServiceNow’s unique position as the workflow platform to create great employee and customer experiences – even in these challenging conditions. With our outstanding team and culture, I am extremely confident in the long-term growth trajectory of this company.”

ServiceNow CFO Gina Mastantuono also pointed out that the company exceeded the high end of its guidance for Q1 as subscription revenues and bills had delivered another strong quarter of operating profit and free cash flow.
“We continue to focus on customer-driven innovation and remain confident in our path to $10 billion in revenue and beyond,” commented Mastantuono.

Four Apps For Helping Companies Help Employees Return Safely

This week, ServiceNow Inc (NYSE:NOW) announced a four-app suite and dashboard built for helping companies manage the essential steps for returning employees to the workplace. Available through servicenow.com/safeworkplace, the Safe Workplace app suite is powered by the Now Platform.

“Let’s get the world healthy, safe, and back to the workplace,” explained McDermott. “ServiceNow is helping companies manage the complex workflows required to keep employees healthy and workplaces safe. The ServiceNow Safe Workplace app suite and dashboard are engineered to make returning to the workplace work for everyone.”

ServiceNow’s new apps include Employee Readiness Surveys, Employee Health Screening, Workplace Safety Management, and Workplace PPE Inventory Management.

Employee Readiness Surveys helps organizations gauge their workforce’s level of preparedness to return to the workplace by capturing employee responses to a series of questions that address employees’ personal readiness for and level of interest in returning to the workplace. Employee Health Screening enables companies to screen employees before entering the workplace to ensure compliance with entry requirements like temperature check and personal protective equipment (PPE) allowing employers to determine if it’s safe for the employee to enter the workplace. Workplace Safety Management helps facilities and workplace services managers to quickly configure clean and hygienic socially-distanced workspaces so that employees can safely return to the workplace and it allows managers to assign shifts so that employees occupy these workspaces for a specific amount of time and configure cleaning schedules at the end of each shift. Workplace PPE Inventory Management can be used by organizations to manage and monitor their PPE inventory needs to ensure the physical safety of their workforce.

Through the power of the Now Platform, ServiceNow pulls together all of the data collected by these apps into a single view with its Safe Workplace Dashboard. The dashboard — which is available at no charge — provides visualizations for data collected by these apps and will be overlaid with a map using aggregated public data on infection rates. And this enables organizations to see what infections look like geographically and drill down into specific workplace locations. The sites are marked with indicators flagging a company’s ability to open and remain open based on workforce and workplace readiness.

Employees returning to the workplace requires careful planning and agility. And business functions across the enterprise have to work together seamlessly to create a safe and productive experience for all employees whether they are returning to the workplace or continue to work from home. These are workflow problems and cross-functional workflows are critical to providing employees the services and experiences needed for doing their jobs seamlessly and efficiently.

Should You Buy ServiceNow Inc (NYSE:NOW) Now?

Based on the reports I have been reading, 75% of analysts are saying buy, 22% of analysts are saying hold, and 3% are saying sell. Personally, I’m bullish on ServiceNow due to the long-term trend of the stock price but you should still be wary about having this company being a major percentage of your portfolio due to its volatility.

Stock chart via Google

Case From The Bears:

The bears say that ServiceNow’s market opportunity has been challenging to define and the company’s expansion deeper into areas outside of IT will have roadblocks from the competition. And the bears pointed out that ServiceNow’s CEO and CFO left the company in late 2019.

Case From The Bulls:

The bulls are saying that ServiceNow’s products have seen rapid market share gains along with solid customer retention. Plus the company is benefiting from high growth drivers like customer service and HR services. And since the GAAP operating margin was breakeven in 2019, the company should be able to keep expanding for the long-haul.

Disclosure: I own a small number of ServiceNow Inc (NYSE:NOW) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.