ServiceNow Soars After Strong Quarter

ServiceNow Inc NOW reported better-than-expected fourth-quarter earnings and strong billings growth, sending shares to a record high.

KeyBanc Capital Markets analyst Rob Owens reiterated an Overweight rating on ServiceNow and increased the price target from $210 to $250.

Oppenheimer analyst Brian Schwartz maintained a Sector Weight rating on shares.

KeyBanc

ServiceNow's fourth-quarter subscription revenue and subscription billings came in ahead of the guidance, with the billings growth the highest in over seven quarters, Owens said in a note.

The analyst attributed the momentum in customer numbers to the strong solution selling. The company now counts among its customers 75 percent of Fortune 500 companies and 44 percent of Global 2000 companies, he added.

"Evidenced by the impressive 4Q, we believe the potential to further penetrate the existing customer set, as well as the relatively large base of untapped enterprise accounts, justifies investment in the sustainable growth trajectory," Owens wrote in the note. The firm raised its billings revenue estimates for 2019 and 2020.

Oppenheimer

ServiceNow's strong position in the ITSM market, attractive value and admirable backlog-to-revenue ratio increases confidence in its multi-year growth and cash flow potential, Schwartz said.

However, the analyst said the good news is already priced into the stock, with the current valuation implying "much meaningful success for the business and strong execution for the next several years without any slips or impacts from a recession." Therefore, he sees shares as fairly valued.

Price Action

ServiceNow shares were up 14.6 percent to $222.23 at time of publication.

Related Links:

Analysts Mixed On Workday's Outlook

Analysts Hold Stances On Atlassian Following A 'Ripper' Of A Quarter