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ServiceNow (NOW) to Acquire Sweagle to Enhance Now Platform

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ServiceNow (NOW - Free Report) recently announced that it has inked an agreement to acquire Belgium-based configuration data management startup –– Sweagle.

The deal will enable ServiceNow to help customers identify and avoid application and infrastructure misconfigurations, which will prevent halts in production and accelerate digital transformation process.

However, the exact financial terms of the deal have not been disclosed by the companies. Per Crunchbase data, Sweagle raised $3 million in funding. ServiceNow expects the acquisition to be completed at the beginning of third-quarter 2020.

Markedly, Sweagle’s DevOps and IT Operations Management (ITOM) Health solutions will be leveraged by ServiceNow to accelerate its newly-introduced Service Graph roadmap as well as configuration data management offerings.

Further, the combined offerings of the companies will enable customers to rapidly deploy applications and infrastructure, while mitigating risks.

These robust enhancements are likely to boost adoption of the Now platform, which will bolster the top line in the quarters ahead. This, in turn, will instill investors’ confidence in the  stock.

ServiceNow, Inc. Price and Consensus

Notably, shares of ServiceNow have returned 42.7% on a year-to-date basis compared with the industry’s growth of 4%.

Acquisitions to Strengthen Now Platform Hold Promise

The Sweagle buyout is in sync with ServiceNow’s focus to bolster the capabilities of its platform through various acquisitions.

In May, the company announced that it has signed a deal to acquire the 4Facility assets of App4Mation to strengthen the workplace services capabilities of the Now platform. The combined offerings will aid companies plan and implement a phased return to workplaces amid the COVID-19 pandemic.

Moreover, ServiceNow had acquired Passage AI and Loom Systems in January to enhance its platform with robust AI capabilities. Passage AI’s offerings will help support all major languages across the Now platform, while Loom system’s abilities will help customers prevent IT issues by delivering deep insight into their operations.

These endeavors are expected to boost ServiceNow’s platform and are likely to aid it acquire more customers. In first-quarter 2020, the company completed 37 transactions that generated net new annualized contract value (ACV) exceeding $1 million. Further, total number of customers contributing more than $1 million to business reached 933 in the first quarter, up 30% on a year-over-year basis.

The company’s growth trend is expected to continue in the coming quarters driven by the rapid digital transformations taking place across all industries, triggered by the coronavirus-induced lockdowns.

Additionally, the fact that Now platform is a single integrated platform makes it convenient and easy to use for analysts and developers, thereby increasing its appeal for potential customers.

Persistent Risks

Nevertheless, anticipated decline in IT spending stemming from coronavirus-related disruptions and uncertainty is likely to dampen ServiceNow’s growth prospects at least in the near term.

Further, increasing expenses on product development and growth of international presence are also expected to weigh on the company’s profitability.

Zacks Rank & Stocks to Consider

Currently, ServiceNow carries a Zacks Rank #3 (Hold).

Fortinet, Inc. (FTNT - Free Report) , Dropbox, Inc. (DBX - Free Report) and Fastly, Inc. (FSLY - Free Report) are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Fortinet, Dropbox and Fastly is pegged at 14%, 32.5% and 25%, respectively.

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