ServiceNow Stock Touching New Heights
Today’s stock is an example of one of my favorite strategies of picking up growth stocks in the age of digital disruption. Investing in stocks that stand to gain from the rising trends in digital transformation provides a great opportunity for investors to earn above-average returns.
One of the dominant trends of today is the shift toward the cloud. As enterprises continue to increase their cloud deployment to reduce costs and improve productivity, companies helping such enterprises in their digital transformation can mint money for investors.
One such player is ServiceNow Inc (NYSE:NOW). It is a leading enterprise software company and provides a cloud-based platform that simplifies the way enterprises work. Its cloud services help in automating, predicting, and optimizing business tasks, from IT to customer service, to security operations, to human resources (HR). This creates a better experience, not only for employees, but also for customers of such enterprises.
ServiceNow solutions are deployed by enterprises in a wide variety of industries like financial services, consumer products, IT services, healthcare, government, education, and technology. As of December 31, 2016, the company had about 3,600 enterprise customers, including more than 30% of the world’s 2,000 largest companies, as defined by an annual ranking by Forbes magazine.
The IT service management (ITSM) market is growing by leaps and bounds and presents a multi-billion-dollar opportunity. As per research by Technavio, the global ITSM market is likely to grow steadily, at a compound annual growth rate (CAGR) of eight percent, from now until 2020. The primary growth driver for this market is the emerging technology in the ITSM market. (Source: “Global ITSM Market 2016-2020,” Technavio, last accessed November 17, 2017.)
ServiceNow already enjoys a substantial market share, which is likely to continue to grow. The management team believes that the market for their solutions is significantly large and is continuously expanding. The company is becoming more relevant to its customers.This is evident in the high renewal rates.
The advent of cloud computing has significantly changed the way businesses operate and brought about a sea of change in their operating models. Given the expected market growth over the next four years, NOW stock has the potential to post new record highs.
ServiceNow is focused on being the strategic partner in the era of digital disruption. This is seen from the recent deals that the company has made.
Just last month, the company announced that it would acquire SkyGiraffe, Inc., a mobile platform company. This acquisition should let ServiceNow customers easily deliver consumer‑like mobile experiences for any application built on its platform. That would help employees work mobile‑first, anytime, anywhere.
In September, the company had also acquired the design studio Telepathy to deliver great design and consumer-like experiences in its products and ServiceNow platform.
Apart from innovative solutions, the company has been posting impressive results. When ServiceNow announced its third-quarter results last month, it revealed that it closed 22 deals, with an annual contract value greater than $1.0 million. The company also reported strong performance across every geographical market, with each region achieving or outperforming the target for the quarter. Subscription revenues were about $455.0 million, representing 43% year-over-year growth.
NOW stock has posted more than 300% gains in the last five years and has gone up by over 50% in a year.
Chart courtesy of StockCharts.com
With a leading cloud-based platform, innovative technology, and an expanding set of product capabilities, NOW stock has better days ahead.
As enterprises face digital disruption, ServiceNow has the potential to become an indispensable enterprise cloud partner to its customers as they gain from its platform and multiproduct capabilities in HR, customer service management, and security.
ServiceNow is one of the largest providers of ITSM software, which automates workflows related to IT tasks and services. As enterprises continue moving toward cloud computing, the demand for ServiceNow products should keep going higher. Moreover, ServiceNow helps its customers create value through gaining insights from big data. The company excels at enabling business transformations.
The company’s strong portfolio of applications and growing market share in an expanding market could make NOW stock a great choice as a growth stock.