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ServiceNow Enhances HR Offerings: Time to Buy or Wait on NOW Stock?
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ServiceNow (NOW - Free Report) is enhancing its HR offerings and introducing Generative AI (GenAI) features to enhance employee communications. The new features will make it easier for employees to get support across different departments.
NOW’s Employee Center gives employees a single place to get help across departments. Its Content Engagement for Employee Center offers a better way to connect with employees.
ServiceNow announced Guided Self-Service for Employee Center in the Now Platform Xanadu release earlier this month. It also announced Large Language Model-based proactive prompts, which are powered by Now Assist for HR Service Delivery. This service uses GenAI to streamline work experiences for employees, managers and HR teams.
NOW is adding new capabilities to its AI-powered skills intelligence solution, Talent Development, which includes solutions like Leader Hub and Gigs & Projects, part of Opportunity Marketplace within Talent Development.
Enhancements to Employee Journey Management’s Analytics Center can now help HR leaders understand where employees are on various career journeys. Guided Decision Tree offers an easier way for leaders and HR admins to build employee journeys.
NOW Shares Rise 31% YTD: Will the Momentum Continue?
The latest HR innovations reflect NOW’s strong commitment to boosting relationships with its clientele. ServiceNow has been benefiting from strong expansion in clientele as enterprises undergoing digital transformation continue to adopt its workflow solutions. NOW’s growing GenAI prowess and strong partner base are driving prospects.
Year to date, ServiceNow shares have returned 30.8%, outperforming the Zacks Computer & Technology sector and the Zacks Computers – IT Services industry. While the sector has appreciated 23.1%, the industry has returned 8.3% over the same time frame.
NOW shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.
NOW Trades Above 50-day and 200-day SMA
Image Source: Zacks Investment Research
Let’s dig deeper to find out the factors driving NOW’s prospects.
Year-to-Date Performance
Image Source: Zacks Investment Research
NOW’s Q3 & 2024 Guidance Encouraging
ServiceNow expects third-quarter 2024 subscription revenues between $2.66 billion and $2.67 billion, suggesting an improvement in the range of 20-20.5% year over year on a GAAP basis. At constant currency, subscription revenues are expected to grow 20.5%.
ServiceNow expects the non-GAAP operating margin to be 29.5% in the current quarter.
For 2024, NOW expects subscription revenues to be $10.575-$10.585 billion, which suggests a rise of 22% from 2023, both on a GAAP and non-GAAP basis.
ServiceNow expects the non-GAAP subscription gross margin to be 84.5% and the non-GAAP operating margin to be 29.5% (up from the previous guidance of 29%).
NOW’s Earnings Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $13.75 per share, unchanged over the past 60 days, indicating a 27.55% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $3.46 per share, steady over the past 60 days, indicating an 18.49% year-over-year increase.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $2.74 billion, indicating year-over-year growth of 19.78%. The consensus mark for 2024 revenues is pegged at $10.9 billion, suggesting growth of 21.51% over the 2023 reported figure.
Strong Portfolio & Partner Base Aids NOW’s Prospects
ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. NOW’s latest update, Xanadu, offers AI-powered, purpose-built industry solutions for domains, including telecom, media, and technology, financial services and the public sector.
A strong partner base that includes the likes of Visa, Microsoft (MSFT - Free Report) , NVIDIA (NVDA - Free Report) , International Business Machines (IBM - Free Report) , Genesys, Fujitsu, Equinix, Boomi and Infosys is strengthening NOW’s AI capabilities.
The much anticipated Now Assist integration with Microsoft Copilot for Microsoft 365 is now generally available.
NOW’s Strong Prospects Justify Premium Valuation
However, NOW stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, NOW is trading at 15.18X, higher than its median of 13.39X and the Zacks Computer & Technology sector’s 6.31X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Nevertheless, we believe the strong growth prospect justifies ServiceNow’s premium valuation.
ServiceNow Shares – Should You Buy or Wait?
ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its clientele, thereby boosting subscription revenues. The Growth Style Score of A makes the stock attractive for growth-oriented investors.
ServiceNow currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock.
Image: Bigstock
ServiceNow Enhances HR Offerings: Time to Buy or Wait on NOW Stock?
ServiceNow (NOW - Free Report) is enhancing its HR offerings and introducing Generative AI (GenAI) features to enhance employee communications. The new features will make it easier for employees to get support across different departments.
NOW’s Employee Center gives employees a single place to get help across departments. Its Content Engagement for Employee Center offers a better way to connect with employees.
ServiceNow announced Guided Self-Service for Employee Center in the Now Platform Xanadu release earlier this month. It also announced Large Language Model-based proactive prompts, which are powered by Now Assist for HR Service Delivery. This service uses GenAI to streamline work experiences for employees, managers and HR teams.
NOW is adding new capabilities to its AI-powered skills intelligence solution, Talent Development, which includes solutions like Leader Hub and Gigs & Projects, part of Opportunity Marketplace within Talent Development.
Enhancements to Employee Journey Management’s Analytics Center can now help HR leaders understand where employees are on various career journeys. Guided Decision Tree offers an easier way for leaders and HR admins to build employee journeys.
NOW Shares Rise 31% YTD: Will the Momentum Continue?
The latest HR innovations reflect NOW’s strong commitment to boosting relationships with its clientele. ServiceNow has been benefiting from strong expansion in clientele as enterprises undergoing digital transformation continue to adopt its workflow solutions. NOW’s growing GenAI prowess and strong partner base are driving prospects.
Year to date, ServiceNow shares have returned 30.8%, outperforming the Zacks Computer & Technology sector and the Zacks Computers – IT Services industry. While the sector has appreciated 23.1%, the industry has returned 8.3% over the same time frame.
NOW shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.
NOW Trades Above 50-day and 200-day SMA
Image Source: Zacks Investment Research
Let’s dig deeper to find out the factors driving NOW’s prospects.
Year-to-Date Performance
Image Source: Zacks Investment Research
NOW’s Q3 & 2024 Guidance Encouraging
ServiceNow expects third-quarter 2024 subscription revenues between $2.66 billion and $2.67 billion, suggesting an improvement in the range of 20-20.5% year over year on a GAAP basis. At constant currency, subscription revenues are expected to grow 20.5%.
ServiceNow expects the non-GAAP operating margin to be 29.5% in the current quarter.
For 2024, NOW expects subscription revenues to be $10.575-$10.585 billion, which suggests a rise of 22% from 2023, both on a GAAP and non-GAAP basis.
ServiceNow expects the non-GAAP subscription gross margin to be 84.5% and the non-GAAP operating margin to be 29.5% (up from the previous guidance of 29%).
NOW’s Earnings Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $13.75 per share, unchanged over the past 60 days, indicating a 27.55% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $3.46 per share, steady over the past 60 days, indicating an 18.49% year-over-year increase.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
The Zacks Consensus Estimate for third-quarter revenues is pegged at $2.74 billion, indicating year-over-year growth of 19.78%. The consensus mark for 2024 revenues is pegged at $10.9 billion, suggesting growth of 21.51% over the 2023 reported figure.
Strong Portfolio & Partner Base Aids NOW’s Prospects
ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. NOW’s latest update, Xanadu, offers AI-powered, purpose-built industry solutions for domains, including telecom, media, and technology, financial services and the public sector.
A strong partner base that includes the likes of Visa, Microsoft (MSFT - Free Report) , NVIDIA (NVDA - Free Report) , International Business Machines (IBM - Free Report) , Genesys, Fujitsu, Equinix, Boomi and Infosys is strengthening NOW’s AI capabilities.
The much anticipated Now Assist integration with Microsoft Copilot for Microsoft 365 is now generally available.
NOW’s Strong Prospects Justify Premium Valuation
However, NOW stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, NOW is trading at 15.18X, higher than its median of 13.39X and the Zacks Computer & Technology sector’s 6.31X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Nevertheless, we believe the strong growth prospect justifies ServiceNow’s premium valuation.
ServiceNow Shares – Should You Buy or Wait?
ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its clientele, thereby boosting subscription revenues. The Growth Style Score of A makes the stock attractive for growth-oriented investors.
ServiceNow currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.