ServiceNow (NOW) Moves Contrary to Tech Market with Strong Performance
ServiceNow stock is up for now but well below its 52-week average and yet is performing better than the rest of the tech sector.
Quick overview
- ServiceNow (NOW) is up 4.40% on Monday, contrasting with declines in the broader tech market.
- The company has gained 11% over the past week, while major competitors like AMD, Intel, and Qualcomm have struggled.
- ServiceNow aims to grow its subscriber base to $30 billion annually in the next four years, despite concerns about potential impacts on margins.
- While currently performing well, the company's aggressive expansion strategy poses risks for long-term investors.
The cloud-based workflow company ServiceNow (NOW) is up 4.40% Monday despite much of the technology market suffering severe stock decline.
ServiceNow is swimming against the tide of the tech sector, progressing higher in the last week with a gain of 11% over the last five days of trading. Other tech stocks are in the red for the same period, including market leaders like Advanced Micro Devices (AMD), Intel (INTC), and Qualcomm (QCOM).
NOW is in a highly competitive and rapidly growing tech niche as the company provides workflow solutions and cloud-based services. They excel at combining multiple tasks for a variety of users into a single cohesive system. They have not excelled, however, at growing their revenue and stock value from year to year.
Now Stock Has a Long Recovery ahead
ServiceNow is going through something of a resurgence at the moment, with nearly a month of continuous gains. In that time, they have moved from a stock value of about $135 per share to the current $199 price. However, they are far from their 52-week high of $211.
While the company looks good in the short term, they are a bigger gamble for long-term traders. The company made it into the news recently for their aggressive expansion plan. They are intending to grow their subscriber base up to $30 billion a year in the next four years. Their total revenue for the last quarter was $2.77 billion, and their gross margin was around 77%.
As impressive as that is, their expansion could affect their margins and bring scrutiny down on them from shareholders who are closely watching the tech sector for excessive capital expenditures. Their subscriber revenue counted for most of their first quarter income, coming up to $3.67 billion, and that key area of their business is where they are looking to expand.
The tech sector is experiencing a downward movement that has affected a number of key stocks, and for the moment ServiceNow has avoided that. Their current free cash flow is $1.53 billion, but rapid expansion could cut into that drastically.
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