Service Now (New York Stock Exchange: Now) exceeded expectations at its next earnings event? Of course, I can’t guarantee it, but I’m bullish on ServiceNow stock because its past performance shows its all-weather financial strength. What’s more, ServiceNow stock is trading at a favorable price point, although some investors may notice seemingly inflated valuation metrics.
Headquartered in California, ServiceNow provides cloud-based artificial intelligence (AI)-powered workflow automation software. Simply put, we are a company recognized for helping businesses get their jobs done more efficiently.
However, like many tech stocks, NOW shares will crash in 2022. But that doesn’t necessarily matter, as the impending quarterly report due on Jan. 25 could put ServiceNow stock back on an upward trajectory.
ServiceNow suffered collateral damage from Tech-Wreck
It’s not ServiceNow’s fault that companies cut back on software upgrades because of rising inflation. Nonetheless, NOW equity investors suffered collateral damage last year as the stock fell from $566 to less than $430.
As I’ll explain in a bit here, ServiceNow continued to generate strong revenues throughout 2022 despite macroeconomic headwinds. First of all, though, did the decline in stock prices create attractive bargains for value hunters?
Relying solely on traditional valuation multiples and ignoring everything else can discourage investment in ServiceNow. ServiceNow’s 432.9x P/E ratio, 20x P/B ratio (I generally prefer 3x or less), 12.9x P/S ratio (preferably 5x or less), but some Financial traders would love to see.
If these numbers are decisive for you, it makes sense. Keep in mind that the latest tech companies can defy traditional indicators, and their stock prices can rise relentlessly despite rising valuations. , may ignore or tolerate ServiceNow’s high profitability. Especially after taking a closer look at the company’s impressive earnings history.
ServiceNow has a strong revenue track record
So, have you marked your calendars for January 25 yet? At that time, ServiceNow will be releasing earnings data for the fourth quarter. Analysts have high hopes, and based on the company’s impressive track record, ServiceNow should be able to meet or exceed Wall Street’s expectations.
Believe it or not, ServiceNow has beaten analyst consensus EPS estimates every quarter since early 2018. Additionally, his EPS at ServiceNow has grown significantly over the last few years.
Analysts expect ServiceNow to report EPS of $2.02 in the fourth quarter of 2022. Still, ServiceNow needs to get the job done. In the third quarter of 2022, the company increased subscription revenue by 22% year-over-year and increased the number of large customers (those whose annual contract value is more than his $10 million) to a staggering 60%. rice field.
In other words, ServiceNow maintained a strong growth trajectory even when the economy was volatile and NOW’s stock price fell. This divergence between the stock price and operating results may persuade investors to buy his stock in ServiceNow, even if the company’s valuation multiples rise.
It’s also worth noting that ServiceNow’s non-GAAP subscription gross margins are very high. In fact, its margin has remained at 85% or 86% since Q3 2021. Additionally, the company’s non-GAAP gross margin ranged from 81% to 83% during that period. This is important because it shows that ServiceNow can make significant profits with its product.
Is NOW Stock a Buy, According to Analysts?
Looking to Wall Street, NOW stock enters as a strong buy based on 18 buy and 2 hold valuations. ServiceNow’s average price target is $504.05, suggesting a 14.1% upside potential.
Bottom Line: Should You Consider ServiceNow Stock?
It’s clear that Wall Street has high hopes for ServiceNow. With lots of purchase ratings, analysts envision another impressive EPS print from ServiceNow. Sure, some people may choose to scrutinize company metrics and stay on the sidelines. But that decision can lead to regrets and missed opportunities.
Investors should consider NOW shares now before the company releases another set of earnings results that exceed expectations. If you’re a high-growth, high-margin, high-conviction software specialist, you won’t find a more profitable candidate than ServiceNow.