Is Now the Time to Buy ServiceNow Stock?
ServiceNow Inc (NYSE: NOW) is one of the hottest stocks in the tech sector today. NOW stock creates cloud-based ‘ecosystems’ for businesses that allow workers to move across departments and use various tools to help enhance productivity and communication.
In smaller organizations there is more of an a-la-carte way to go about building out your modern tech infrastructure. You work with a cloud providers, maybe a tool for marketing that also works for sales and customer service. You buy another for back office operations and human resources. And then you see if there’s a way to make them work together through a patchwork of other applications.
With enterprise-level companies that kind of piecemeal management and implementation would be a nightmare. So, NOW, along with other competitors like IBM (NYSE: IBM), creates complete ecosystems and build out ‘middleware’ software that allows one application to work across platforms with other applications.
Started just 15 years ago, NOW specializes in Healthcare, Education, Government and Finance sectors and has about a $47 billion market cap at this point. It’s a big cap stock which moves it into a different realm than other smaller cloud players.
Year-to-date, NOW stock is closing in on 50% and there’s plenty of momentum in the stock at this point. NOW released Q1 earnings in late April and the numbers were so good they pushed the whole sector higher.
And most analysts boosted their price targets on NOW stock after it beat earnings, revenue and free cash flow growth. One analyst called it the ‘best house on the block’.
This isn’t too surprising from my perspective since my Portfolio Grader gives the stock a B rating here. Another quarter or two of similar outperformance and that will likely get the grade up to an A.
But by the time that happens, there will be plenty of hot money in the stock and the price may be a bit richer than it is now.
The Bottom Line on NOW Stock
Some stocks are Bs that headed to Cs. Some are Bs headed to As. NOW is in the latter camp.
What’s more, NOW stock isn’t going to suffer any damage from the China-U.S. trade war. Most of its clients are US-based and much of their business in derived in the US market. This is especially true for its financial sector clients, who are building out artificial intelligence and Big Data modeling for investors.
This automated investing helps lower fees that these firms charge companies that are subscribing to 401k plans and the like. And all that data can be integrated across the company’s platforms using NOW’s ecosystem.
It’s also small enough relative to its larger competitors that it’s still nimble and doesn’t have a legacy mindset in how to build or upgrade systems.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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