ServiceNow’s stock has dropped significantly in the last few months. It went from $1196 at its highest level to $772 today. The stock price has fallen by more than 35% since its peak this year. It is in a bearish market. The article below explains the financial results that will be released next week.
ServiceNow is growing its business
ServiceNow, one of the leading technology companies in America is a leader. Cloud-based ITSM services are provided by this platform. The company’s primary business is managing and automating workflows in IT Services, Customer Service, and Low-Code Development.
It provides services to thousands companies across the US. Accenture, Adidas and Apple are among the clients.
ServiceNow has grown over the years as demand for its products increased. The company’s revenue is up from $4.5billion in 2020 to $10.98billion in 2024. Profits have also been increasing in recent years.
Earnings ahead NOW
Next week, ServiceNow’s financial results will provide the next major catalyst to its stock price.
Yahoo Finance analysts expect that the company’s revenue will increase by 18.5%, to $3.09 Billion. Estimates for earnings per share are expected to rise from $3.41 in the past estimate, up to $3.83.
ServiceNow is known for consistently beating analyst estimates. ServiceNow’s EPS, for example, was $0.01 higher than the analyst estimates in its last quarterly earnings.
The forward estimates are usually more important than the first earnings. Analysts estimate that the company’s annual revenue is $13,02 billion. The current quarter revenue of $3.11 billion will also be estimated by most analysts. These numbers, if accurate, would mean that the full-year figure for this company will be 18%.
Value concerns still remain
ServiceNow’s valuation has been a major concern for many years. The data shows its P/E ratio was 112.8, down significantly from the high of last year.
The sector median P/E ratio was 23.2. Non-GAAP P/E is also 48.7 and higher than the sector median of 18.
The numbers here are impressive, particularly when compared to other SaaS providers like Adobe, Microsoft and Salesforce. Adobe’s forward P/E ratio is 21, while Microsoft has 28 multiples and Salesforce 22.
The rule of 40 is the most effective way to evaluate a SaaS business like ServiceNow. It compares the growth rate and the margins.
ServiceNow has a revenue growth of about 21%. Its net profit margin, however, is only 16%. This gives it a Rule-of-40 score of 38%. This is an indication that the stock may be a little overvalued. Addition of its FCF and revenue growth shows it’s not overvalued.
ServiceNow Stock Price Analysis: A dangerous trend is forming
Stock price Analysis of ServiceNow
On the daily chart, the NOW shares have fallen from a peak of 1,196 dollars in January down to $722 today. At that time, it formed a double top point which signified its turn around. Stock has fallen below ascending trendline connecting the lowest swings from May 5 to date.
After the moving averages of 200 days and 50 days crossed, ServiceNow’s stock price also formed a Death Cross. It is one of most common bearish cross patterns.
It is likely that it will continue to fall after earning, and the target initial price would be $680. If the price rises above this trendline, it will likely lead to further gains.
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