Tributary Capital Management Trims ServiceNow Position

Tributary Capital Management LLC reduced its stake in ServiceNow Inc (NYSE:NOW) by 10.0% during the second quarter of 2019, according to its most recent filing with the Securities & Exchange Commission (SEC). After selling 1,500 shares during the period, the institutional investor held 13,500 shares of the information technology services provider. At the time of the filing, Tributary Capital Management LLC’s ServiceNow holdings were valued at approximately $3,707,000.

Other Institutional Investors Adjust Their Positions

Tributary’s reduction contrasts with significant position increases made by several other large institutional investors:

• Norges Bank established a new position in ServiceNow during Q4, valued at approximately $297,403,000.
• GQG Partners LLC increased its position by 444.8% in Q1, acquiring an additional 804,514 shares. The firm now holds 985,385 shares valued at $242,370,000.
• Jennison Associates LLC raised its position by 26.2% in Q1, adding 630,491 shares to reach a total of 3,036,568 shares valued at $748,484,000.
• Carillon Tower Advisers Inc. grew its position by 60.2% in Q1, purchasing an additional 263,615 shares to bring its total to 701,244 shares valued at $172,849,000.
• American Century Companies Inc. increased its position by 14.6% in Q4, adding 226,028 shares for a total of 1,772,188 shares valued at $315,538,000.

Taken together, institutional investors owned approximately 93.66% of ServiceNow’s outstanding stock at the time of reporting.

Insider Transactions

Two notable insider sales were disclosed during this period:

• Chirantan Jitendra Desai (company insider) sold 1,563 shares on July 12th at an average price of $302.30, totaling $472,494.90. Following the transaction, Desai retained 32,824 shares valued at approximately $9,922,695.20.
• Michael Scarpelli (CFO) sold 31,183 shares on August 13th at an average price of $260.22, totaling $8,114,440.26. After the sale, Scarpelli directly owned 36,200 shares valued at approximately $9,419,964.

In total, insiders sold 117,359 shares valued at $32,001,932 over the preceding 90-day period. Company insiders owned approximately 1.00% of the total stock at the time of reporting.

Analyst Ratings and Price Targets

Multiple brokerages issued research coverage on ServiceNow around this period:

• BMO Capital Markets reaffirmed an “outperform” rating and raised its price target to $315.00 (up from $295.00) on July 25th.
• JMP Securities raised its price target to $325.00, issuing a “market outperform” rating on July 25th.
• ValuEngine downgraded ServiceNow from “strong-buy” to “buy” on June 3rd.
• Cleveland Research initiated coverage on June 17th with a “buy” rating.
• KeyCorp raised its price target from $270.00 to $320.00 and assigned an “overweight” rating on July 25th.

At the time of reporting, the analyst consensus breakdown was as follows: four analysts rated the stock a “hold,” twenty-six assigned a “buy” rating, and two assigned a “strong buy.” The average rating was “Buy” with a consensus price target of $287.86.

Key Financial Metrics (as of August 2019)

Shares of NOW opened at $256.91 on the Monday referenced in the report. Key financial metrics at the time included:

• Market Capitalization: $47.30 billion
• P/E Ratio: 1,284.55
• PEG Ratio: 21.00
• Beta: 1.30
• 50-Day Moving Average: $281.92
• 200-Day Moving Average: $259.51
• Debt-to-Equity Ratio: 0.54
• Current Ratio: 1.10
• Quick Ratio: 1.10
• 12-Month Low: $147.63
• 12-Month High: $303.17

Q2 2019 Earnings Summary

ServiceNow reported its Q2 2019 earnings on July 24th. Key highlights included:

• EPS: ($0.01), beating the Zacks consensus estimate of ($0.03) by $0.02.
• Revenue: $833.90 million, slightly above the consensus estimate of $831.50 million.
• Year-over-Year Revenue Growth: 32.1%
• Return on Equity: 4.29%
• Net Margin: 0.09%

For context, the company reported EPS of $0.49 in the same quarter of the prior year. Research analysts projected full-year EPS of $0.43 for the then-current fiscal year.

About ServiceNow

ServiceNow, Inc. provides enterprise cloud computing solutions that define, structure, manage, and automate services for large organizations worldwide. The company’s core offerings include IT service management (ITSM) applications as well as digital workflow products spanning customer service, human resources, security operations, integrated risk management, and other enterprise functions.

Note: All financial data in this article reflects publicly available information as reported in SEC filings and analyst research from mid-2019. This article is for informational purposes only and does not constitute investment advice.