NOW Stock Forecast: Long-term Bullish Outlook For The Fast-growing Company

motek 1The ServiceNow stock forecast article was written by Chloe Peng, Analyst at I Know First. Master of Science of Finance candidate at Brandeis University.

Summary

  • The cloud service company ServiceNow achieved 34% revenue growth in Q1 2020 and forecasts a 30% growth in Q2.
  • Zoom adopted the Now platform and customer service management system to launch new services and improve customer support.
  • I have a bullish outlook for NOW during the rest of 2020.

ServiceNow aims at reducing the complexity in jobs through digitalization of workflows. Its Now Platform enables the steps of a job to naturally flow across separate departments, systems and processes of a business. Its product portfolio includes offering IT, Employment and Customer workflows to improve the experience of a company’s stakeholders.

ServiceNow (NYSE: NOW) stock soared by 41.29% in the past 6 months. As a cloud IT management company, it rose alongside with many software or tech companies, which benefited from the increase in digital service demand during the pandemic.

Investors are still passionate about these companies and I’m confident that NOW will grow into the next normal. In this article, I will present you the latest updates on ServiceNow and the reasons why I have a bullish recommendation.

ServiceNow Ranks The 6th In The Cloud Applications Market

In 2019, the top 10 Cloud software vendors accounted for nearly 45% of the global Cloud applications market, which is expected to grow with a CAGR of 6.1% from 2019-2024. ServiceNow has the 6th most market share in the industry.

The cloud service development is a hot topic that will never end in these years. I expect ServiceNow to outgrow the market average. My estimation is supported by some recent updates of the business, for example its partnership with Zoom which I will talk about in the next section.

ServiceNow Walks Hand In Hand With Zoom

You must have heard how Zoom has benefited from ‘work from home’ and ‘stay at home’ orders. Employees use Zoom to hold meetings and schools provide online lectures through Zoom. Since most universities and colleges stay online during the rest of 2020, I expect the demand for online meetings to continue.

(Source: Business Wire)

The growing market makes Zoom to search for better services to gain a stronger presence. As a result, NOW announced that the Now platform has been adopted by Zoom ZM to support its new Hardware as a Service (HaaS) business model. Zoom will utilize the platform’s outstanding abilities to launch new service, which seeks to replace traditional phone systems with the new Zoom Phone. Further, ServiceNow’s customer service management offering will improve Zoom’s services to customers. The two are confident that such a move will help Zoom manage explosive inflow of customer requests.

(Source: ServiceNow, the Now platform)

At the same time, The Zoom deal is a major win for ServiceNow and it highlights the strength of Now platform. Moreover, higher adoption of ServiceNow’s offerings is likely to drive the top line in the upcoming days and instill investors’ optimism in the stock.

A Fast-growing Company That Never Let You Down

In ServiceNow’s Q1 2020 earnings report, the company reported a 34% year-over-year revenue growth and its EPS has beaten expectations for the past 4 quarters. Despite the pandemic hitting the U.S. in earnest toward the end of March, ServiceNow still forecasts a solid 29% to 30% subscription growth rate for the second quarter as customers are still actively expanding the use of digital tools.

ServiceNow will announce its Q2 earnings on July 29, becoming the first technology company to unveil its Q2 results. And I’m confident that it won’t let us down.

(Source: Yahoo Finance)

Like I said, you see from the following table that ServiceNow is really outgrowing its peers. The revenue growth is the highest among the 4. High growth rate results in high investor confidence and high valuation ratios, meaning that $1 of earning growth results in higher stock price growth for NOW. 

(Source: Seeking Alpha)

Conclusion

The cloud application market rose during the pandemic when companies seek solutions to digitalize their workflow to support work from home orders. As the 6th largest company in the industry, ServiceNow grows 34% in Q1 2020 and is confident to grow another 30% in Q2. Also, its revenue is very likely to surge as it partnered with Zoom to provide the Now platform and customer service management solutions. Backed by satisfying earnings and future growth potentials, NOW stock soared by 41.29% during the past 6 month and I expect the stock to grow further in the rest of 2020.

My bullish outlook is in line with I Know First’s algorithmic prediction on NOW, which gives a 1-year signal of 306.35 with a predictability of 0.57. See chart below.

Past Successful I Know First ServiceNow Stock Forecast

On April 14 2020, I Know First Algorithm gave a bullish 3-month ServiceNow stock forecast, which ranked as the one of the top performing predictions with a return of 45.73% in 3 months. See charts below.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock market forecast, gold prediction, Forex forecast, oil prices forecast, and, in particular, top tech stocks. Today, we are producing daily forecasts for over 10,500 assets. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.


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